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The local rickshaw association had filed a police complaint about the incident.
CCTV footage reportedly shows a man tearing off a portion of the banner and roaming around the town with it on January 5 at midnight. The person appears to be mentally unwell.
The torn portion of the banner was found near Vivekananda Circle.
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A protest was held in Sullia on Sunday demanding the immediate arrest of the perpetrator. Congress and JDS have also condemned the incident.