Madhya Pradesh state open school director Rajendra Prasad, its assistant director Rajesh Upadhayay and one other person, Devendra Gupta from Indore, were arrested yesterday in connection with the racket which came to light some time back, they said.
The director allegedly tried to destroy certain documents in his office, but his action was caught in a CCTV.
When sleuths of state police's special task force confronted him with the CCTV footage, he broke down yesterday following which he was arrested.
The four included three directors of various schools, identified as Kaushal Saraswat, Ashok Gupta and Akhilesh Chouhan, and a computer operator - Pradeep Bairagi.
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Hundreds of mark sheets, migration certificates and other documents were recovered from them.
They used to look for vulnerable students and after taking a huge amount from them, they would provide them fake mark sheets through senior officials, police said.
Based on the information gathered from these four persons, the three arrests were made yesterday.