Finance Minister Arun Jaitley sued Delhi Chief Minister Arvind Kejriwal for Rs 100 million ($1.51 million) on Monday for slander, escalating a battle between the ruling party and the opposition that has stalled key reform legislation in Parliament.
Jaitley's office said he filed civil and criminal defamation cases against Kejriwal and five members of his Aam Aadmi Party (AAP).
Kejriwal, who routed Prime Minister Narendra Modi's Bharatiya Janata Party (BJP) in state elections this year, accused Jaitley last week of allowing fraud at a cricket association he ran from 2003 to 2013.
Kejriwal's team said Jaitley should resign or be removed to clear the way for a new investigation, and that they were planning to file a police case against Jaitley "very soon".
Jaitley, a top member of the BJP, has said the allegations are baseless and absolutely false. His office said the suit was filed in his personal capacity.
The BJP's battles with Kejriwal and another with opposition Congress over a corruption case against party leaders Sonia Gandhi and her son, Rahul Gandhi, have come at the cost of the legislative agenda in the winter session of Parliament.
Already, legislation to institute a Goods and Services Tax appeared to have been delayed because of disruptions in Parliament.
Modi's office and the BJP have called a meeting on Monday to discuss the allegations against Jaitley. Senior members of the BJP said they backed Jaitley.
The fracas over Jaitley started last week after federal investigators raided Kejriwal's office while investigating one of the top bureaucrats in the Delhi government.
Kejriwal alleged that the raid was Jaitley's attempt to scuttle his investigation into alleged corruption at the Delhi and District Cricket Association (DDCA).
A 2014 inquiry into the DDCA unearthed auditing errors and unaccounted expenses that were sanctioned during Jaitley's tenure.
Authorities unearthed more than a dozen fake contracts and fake companies that operated between 2003 to 2013 to transfer millions of rupees in cash, a senior DDCA official told Reuters on conditions of anonymity.
Two senior government officials said a DDCA committee, whose mandate was limited to investigating transactions in the 2013-2014 financial year, does not blame Jaitley but had uncovered "huge financial irregularity".
Kirti Azad, a BJP lawmaker and former cricketer, has demanded fresh investigations.
Azad said large-scale rigging of accounts was rampant in the cricket board but he did not name Jaitley in the scam.