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Police rushed in extra forces to control the unrest and sent fire trucks to tackle the blaze.
While some officers and locals had minor injuries, the situation is now under control.
A special police team is searching for those accused in Chhagan's murder, who are still on the run, and senior officials are talking with both communities to calm things down.
People from both communities staged a sit-in at the local police station, but authorities say they are keeping a close watch to maintain peace.