Javid Ahmad War and his associate Reyaz Ahmad, both residents of Sopore, were arrested from Shedipora village of Drugmullah, 100 kms from here, they said.
War, who used to identify himself as a sub-inspector, and his two associates had been indulging in extortion in the area, they said.
However, their third associate Javid Ahmad Khanday managed to fled from the spot, police said, adding that efforts were on to nab him.