One person was on Friday shot at in front of the residence of a superintendent of police in Kanshi Ram colony here leading to tension in the area.
Following the incident, locals gathered outside the house of the accused, Dheeraj Awasthi, and set it on fire.
The angry mob also burnt down a motorcycle and damaged the jeep of the circle officer, police said.
The victim, Zahir Khan (45), was shot at by Dheeraj after he refused to pay extortion money. Khan was rushed to the hospital, where his condition was stated to be serious.
Heavy police force has been deployed in the area to check any untoward incident.
The accused has been arrested, police said. A case against unknown persons was filed at Pakvadha police station in this connection, Srivastava added.