The accused floated a chain system through which they were reaching out to a large number of youths aspiring for jobs in railways, police said.
One gang member was held in Kota on Republic day and the second was caught in Haryana, they said.
On the basis of information from the duo, five others were held from different locations in Maharashtra on February 5 and 6, SHO Kota Kotwali Haricharan Meena said.
"The gang committed fraud with hundreds of job seekers across the country. The accused promised jobs in railways for posts like helper, TC, ASM, Engineer without any exam, interview and document verification, saying they have strong connections in railways and in political circle," he said.
They had a rate list and used to charge Rs 8 lakh for recruitment for helper, Rs 10 lakh for TC, Rs 12 lakh for ASM and Rs 18 lakh for engineer, Meena said.
However, no candidate was given any job.
"We have seized more than 50 fake joining letters which were prepared and issued in the name and seal of a railway official of Kota division. The candidates were asked to join Kota division in two batches in February," he said.
The gang was also looking for a candidate to commit fraud in the name of appointing him as a member in railway board, the SHO said.
Bhushan Deshmukh was held during Republic day checking in Kota, while his accomplice Prashant Singh was held in Haryana.
The gang also had a woman member who would be nabbed soon, he said, adding that police is examining the role of railway officers in the fraud.
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