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The accused, Pavaratty native Justin, has allegedly used the notes he printed for six months.
Police suspect the notes might have been used by real estate players to dupe people by putting up a show of wealth.
According to Alappuzha South Police, the incident came into light when a person handed over seven fake notes that he got from Edathua Agriculture Officer M Jishamol to a bank.
Mithun Vishwambharan, 33, had been on the run after escaping from the police custody while being taken out in handcuff for evidence-collection.
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