Border Security Force (BSF) personnel engaged in a gun battle with Maoists, leaving one trooper injured, while rescuing villagers kidnapped by the rebels.
The incident took place in Odisha's Malkangiri District on Thursday.
The rebels have kidnapped three villagers, including a son of a village head.
One victim escaped from the clutches of the rebels during the gun battle, while the others are yet to be rescued.
One BSF trooper was also injured during the exchange of fire.
The victim shared his plight after managing to escape from the rebels.
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"They asked some questions and before we could say anything, they kidnapped us and took us to their camp. They tortured us alleging that we are the BSF informer. We tried to convince them that we are poor men, we don't have any relation with BSF but they did not listen to us. Meanwhile, there was a sound of firing. Perhaps BSF had surrounded the Maoists and then there was counter firing and taking the advantage, I managed to flee from there but other two villagers are still captured," said the victim, Padia Madhi.
Maoists are rebels who try to sink deep roots and form links after decades of neglect.
The rebels are rapidly expanding their insurgency and could move from remote rural areas to cities.
Equipped with automatic weapons, shoulder rocket launchers, mines and explosives, the Maoists want to cripple economic activity.
The Maoist insurgents are estimated to number 7500 hardcore fighters in nearly a third of India's 630 districts. While they have made few inroads into cities, they have spread into rural pockets in 20 of 28 states.
Maoists say they are fighting for the rights of poor farmers and landless labourers. Thousands have been killed in the insurgency since the late 1960s.
Prime Minister Manmohan Singh has described the Maoist rebellion as one of the gravest security threats to India.