Mr Mitchell, who is facing 17 charges including extortion with threats to kill over the public altercation, applied for bail in Melbourne Magistrates Court on Wednesday.

Detective Acting Sergeant Chris O'Brien, of the anti-bikie Echo Taskforce, told the court the alleged victim had his two-and-a-half month old daughter in a pram when he went to meet Mr Mitchell at a South Melbourne cafe last Saturday..

Detective O'Brien said the alleged victim believed bringing his daughter would provide him with some level of protection.

He told the court the alleged victim sat down at a table outside the busy Clarendon Street cafe with Mr Mitchell and another man known as only "Charlie".

Mr Mitchell allegedly demanded $300,000 from the victim, whom he knew had received a $1 million inheritance, the court heard.

When the alleged victim told Mr Mitchell he could not access the money, the former bikie is said to have punched him in the face, cutting his left eye.

As the blood began to run down the man's face, Mr Mitchell stood up and took a black Beretta semi-automatic handgun from his waistband and thrust it into the man's stomach, the court heard.

"Charlie" then allegedly stepped forward in an attempt to shield what was happening from passers-by, Detective O'Brien said.

Mr Mitchell allegedly said: "I'll shoot you, you c---, if you don't give me the money," before adding, "Take the kid away or I'll shoot it as well."

The alleged victim then left the cafe with his baby daughter. He claimed Mr Mitchell was laughing as he walked away.

"As a result of the increasing level of aggression in these demands, the victim contacted police because he thought he was in a position of no return," Detective O'Brien said.

The alleged victim had known Mr Mitchell for 12 years and was once considered a prospect for the Bandidos, Detective O'Brien said. But he contacted a Comanchero boss late last year asking for protection from Mr Mitchell.

Mr Mitchell is also charged with recklessly and intentionally causing injury, possessing a gun and possessing a belt with a built-in double-edged dagger.

Magistrate Franz Holzer said there was "a real and sensible risk" that Mr Mitchell would contact the alleged victim or other witnesses if released. He also said it was preferrable Mr Mitchell remain behind bars for his own safety.

Mr Mitchell was refused bail.

He is due to face court again on May 6.