Rakesh Saini, father of two children, was found murdered with his throat slit at his residence, police said.
The victim's wife Krishna and nephew Pawan were allegedly in an illicit relation.
After Saini came to know about their relations, he quarrelled with them and asked Pawan, who was living with them since last six months, to leave the house, they said.
"Annoyed over this, Pawan and Krishna planned the murder. Last night, Pawan went to their house where Rakesh was sleeping with Krishna and two kids. Krishna opened the doors for him and they slit his throat," DCP East K Rastradeep said.
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After the murder, they washed the sharp-edged object used in the crime, he said.
Krishna then slept with the body lying in a pool of blood in the room and Pawan left, police said.
Later this morning, Krishna told the family members that someone murdered her husband when she was sleeping following which police were informed.
"Other family members were also present in the house when the victim was murdered but they claimed that they did not hear any cries or screams of Rakesh," the DCP said.
Both the accused have been arrested, he said, adding, the body was handed over to family members after postmortem.