Police said the mobile phone without battery and SIM card was recovered during repairs to a pipe in a cell block and was handed over to them.
Earlier raids in the jail after the controversy erupted had only led to recovery of some mobile chargers and earphones.
In a serious violation of prison rules, some of the accused in the Chandrasekharan murder case had made Facebook postings using their mobile phones.
Chandrasekharan, who floated his own outfit RMP after quitting CPI(M), was hacked to death in May 2012 near his native village Onchiyam. Many of the accused in the case are local CPI(M) workers, apart from goons hired to execute the murder of Chandrasekharan.
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Home Minister Thiruvanchur Radhakrishnan had admitted it was a breach of prision rules and constituted a three-member committee to probe the incident.
Jacob had said the timing of the expose of prison rule violations was "suspect" and appeared to have been made with the intention of prejudicing the judgement, expected to be delivered by the court this month end.
His justification for the meeting of one of the accused, a local CPI(M) worker, with his wife and MLA K K Lathika while being taken to hosptial a few weeks back also found serious fault with the government and the ruling party.