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Azhar, known for his close ties with Pakistani intelligence agencies, was taken to an undisclosed destination and was being questioned, The News said.
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The interior minister ordered an inquiry into "how, why and on whose orders a raid was conducted at Salman Masood's house," read a statement issued from his ministry.
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Intelligence officials said raids were carried out in Gujranwala, Jhelum and Bahawalpur districts.
