The encounter took place near Kander village under Arki police station area when the Peoples' Liberation Front of India (PLFI) ultras fired at security personnel comprised of CRPF and state police.
Superintendent of Police, Ashwini Kumar Sinha said one extremist, identified as Mahadeo Munda of Charom Bartoli in Khunti was killed in the encounter.
One country-made carbine, magazine, one country-made rifle, one pistol, a jacket, mobile phones and two motorcycles were recovered from the spot, he said.
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