The Hyderabad City police arrested a Bangladeshi youth Rizwan Ghazi for illegally staying in the city.
He was produced before the Metropolitan Sessions judge who remanded him to judicial custody for 14 days.
The city police, who had earlier suspected his role in the twin blasts on August 25 in Hyderabad that claimed 43 lives, could not find any evidence linking him to the blasts.
The 25-year-old Ghazi has a close resemblance to the Lumbini Park blast suspect whose sketch was released by the police.
Ghazi went missing from his rented house in Hyderabad days after his sister Shafeera Rustomjah was arrested by the police in Charminar area last month for possessing fabricated documents.
Shafeera had confessed to the police that Ghazi was staying illegally in the city for the last six years.
After a manhunt by several special teams, the Hyderabad police is believed to have picked up Ghazi from Bangalore several days ago.
He was subjected to intense grilling, but the police found no evidence against him in connection with the bomb blasts.
Police found out that he had made several calls to Pakistan and Bangladesh. However, it later became clear that he had called his relatives and not any terror elements.
The city police formally arrested him for offences under the Foreigners' Act and Section 420 of Indian Penal Code for over-staying and obtaining identification documents like a driving license, ration card and the income tax PAN card by furnishing false information.
Ghazi belongs to Chittagong, but he acquired the PAN Card and other documents on two addresses of Hyderabad.
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