Acting on a tip-off, police tried to intercept a car this morning in which the members of Rahul Khatta gang were travelling but the vehicle sped away, City Superintendent of Police Salman Taj Patil said.
However, they were cordoned off following which the gang members opened fire and police retaliated, he said.
Two gang members, identified as Dharmendra alias Deewan and Rahul, were injured in the encounter and arrested while their three accomplices managed to flee, Patil said.
Dharmendra is carrying a reward of Rs 15,000 on his head while Rahul is wanted in several criminal cases, he said.
Three country-made pistols, live cartridges and a car were recovered from their possession, Patil said.