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Kottayam West Police arrested Ambalappuzha residents Vilasini (68) and her daughter Sheeba (34) on Thursday.
Vilasini was apprehended after a lottery shop owner grew suspicious over the notes she gave to purchase lottery tickets and informed the police.
Police took her into custody and found 14 fake notes of Rs 100 denomination and that her daughter was also involved in it.
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Police said Sheeba began printing fake notes after learning it from the internet and suspect that she sent her mother to purchase provisions and other materials from small-scale traders.