The six people werecollecting hefty sums from unsuspecting individuals over false promise of securing them jobs at the Research and Analysis Wing (RAW), according to a police statement.
Those arrested have been identified as Ramananda Nauniya, Santosh Karki, Binod Karki, Padam Bahadur Shrestha, Chitra Bahadur Shrestha and Geeta Maharjan, it said.
Nauniya, the mastermind of the gang, with the help of other accused, had been using fake letterhead of the Indian Embassy to prepare counterfeit job contracts, the police said.
"Nauniya would ask the 'hired' people to go to certain areas and observe the activities and report back," Superintendent of Police, Teku, Dibesh Lohani said.
"They had also duped millions of rupees from various people. He had asked people to pay him an amount equivalent to four months salary for his services in securing the job," Lohani said.
Police launched an investigation into the matter after more than a dozen victims approached them, alleging fraud.
The victims have said that they were promised a jobwith a monthly salary of 75,000 Nepalese rupees.
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