ACP Khushalchand Baheti said that the former principal of Marathwada College of Education Dr Suhail Khan had filed a complaint against the current principal, Imran Osman.
Khan alleged that Osman and Habib Chisty were threatening to defame him and demanding Rs 25 lakh for not doing so.
The duo also forcibly took his ATM card and made him sign a cheque of Rs five lakh, he said.
City Chowk police arrested Imran and Habib, and a court today remanded them in police custody till Monday, Baheti said.
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