Those arrested were identified as Constables Ravindra Rathod, Prashant Kamble and Kishore Khade, police said.
Four unidentified associates of the trio, all posted at Raigad police head office, are also wanted in the case and they are currently absconding, they said.
The incident was came to light when businessman Surendra Labhsharan Dadhiya, a resident of suburban Ghatkopar, approached Raigad Police with a complaint.
According to the complaint, Dadhiya was caught by the three policeman when he was entering Alibaug, headquarters of Raigad district, with Rs 50 lakh in new notes which he had brought for a land deal sometime last month.
They also looted Rs 40 lakh out of the Rs 50 lakh he was carrying, the complaint alleged.
Dadhiya returned to Mumbai after the incident but later approached Raigad Police with his complaint.
Police inquired into the incident and arrested the three Constables, who were booked under IPC Sections 395 (punishment for dacoity) and 364 (kidnapping or abducting in order to murder).
They were produced before the Chief Judicial Magistrate at Alibaug, who sent them in police custody till January 13.
Disclaimer: No Business Standard Journalist was involved in creation of this content
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