The incident took place Monday night when the victim, Akil (55), and his friend Chaman were sleeping on the roadside of the locality, a police officer said.
Suddenly, Nishad came there and asked Akil to lend him some money to buy liquor. When Akhil refused, a scuffle broke out between the two and as it turned ugly, Chaman fled the spot fearing for his life, he said.
On Tuesday morning, Chaman found Akil's body lying in a drain near a crematorium in the same locality, following which he informed about the incident to deceased's brother Nayim, the officer said.
Police reached the spot and inspected the spot and fished out the body of the man from the drain, he said.
The accused was under the influence of alcohol at the time of the incident, he added.
He also stabbed Akil with the knife multiple times on his face, neck and temple area, the police officer said.
Subsequently, a case was registered in connection with the incident and the body was sent for postmortem, he said.
(With inputs from agencies.)