The "successful" trap was laid on Thursday evening at the office of the state-owned Karnataka Soaps and Detergents Ltd (KSDL), which makes the brand 'Mysore Sandal Soap'.
Virupakshappa's son V Prashant Mada, who is the chief accounts officer of the Bangalore Water Supply and Sewerage Board (BWSSB), was arrested by the Lokayukta Police.
They also seized the money being taken by Mada as a bribe.
Virupakshappa, an MLA from Channagiri in Davangere district, is the chairman of KSDL.