India's foreign minister on Sunday denied placing a call to Pakistan's president at the height of the Mumbai siege, which led to its air force going on high alert, saying the reports were an attempt to divert attention from the fact the attack came from Pakistan.

Pakistan said President Asif Ali Zardari received a "threatening" call during the crisis, apparently from Indian External Affairs Minister Pranab Mukherjee.

The back-and-forth over the call, while appearing farcical, underscores the dangers of the poor communication and deep mistrust between the nuclear-armed rivals.

Meanwhile, India's investigation into the attacks was running into similar theatrics, with security officials demanding the release of one of only two men arrested so far, saying he was actually a counterinsurgency police officer who may have been on an undercover mission.

Indian authorities believe the banned Pakistani-based militant group Lashkar-e-Taiba, which has links to the disputed Kashmir region, trained the gunmen and plotted the attacks that left 171 people dead after a three-day rampage through Mumbai that began Nov. 26.

"I had made no such telephone call," Mukherjee said in a statement Sunday, reacting for the first time to the reports.

On Saturday, Pakistan's Dawn newspaper reported the alleged hoax and said it prompted Pakistan to put its air force on high alert. A security official later said a man pretending to be Mukherjee had spoken in a "threatening manner."

But Pakistani Information Minister Sherry Rehman said in a statement the call "was placed from a verified official phone number of the Indian Ministry of External Affairs."

She did not explicitly say that the call was from Mukherjee, but two other government officials said it was him. They spoke on condition of anonymity because of the sensitivity of the situation.

Mukherjee said it was "worrying that a neighboring state might even consider acting on the basis of such a hoax call."

"I can only ascribe this series of events to those in Pakistan who wish to divert attention from the fact of an attack on India from Pakistani territory by elements in Pakistan," he said.

The statement said India found out about the call from another country — apparently from the U.S., which has been seeking to lower tensions — and had sent messages to Pakistan assuring it that no such call was made.

Pakistan says it has yet to see any proof of New Delhi's allegations that its citizens were involved in the Mumbai attacks, but is prepared to cooperate with India. It has denied any of its state agencies were involved, noting it too is a victim of terrorism.

In the investigation, senior police officers in Indian Kashmir, which has been at the heart of tensions between India and Pakistan, demanded the release of the arrested officer, Mukhtar Ahmed, saying Saturday he was one of their own and had been involved in infiltrating Kashmiri militant groups.

The arrests, announced in the eastern city of Calcutta, were the first since the bloody siege ended. But what was touted as a rare success for India's beleaguered law enforcement agencies, quickly turned sour as police in two Indian regions squared off against one another.

The implications of Ahmed's involvement — that Indian agents may have been in touch with the militants and perhaps supplied the SIM cards used in the attacks — added to the growing list of questions over India's ill-trained security forces, which are widely blamed for not thwarting the attacks.

Earlier Saturday, Calcutta police announced the arrests of Ahmed and Tauseef Rahman, who allegedly bought SIM cards by using fake documents, including identification cards of dead people. The cards allow users to switch their cellular service to phones other than their own.

Rahman, of West Bengal state, later sold them to Ahmed, said Rajeev Kumar a senior Calcutta police officer.

Both men were arrested Friday and charged with fraud and criminal conspiracy, Kumar said.

But the announcement had police in Srinagar, the main city in Indian-controlled Kashmir, fuming.

A senior officer said Calcutta police were told that Ahmed is "our man and it's now up to them how to facilitate his release." He spoke on condition of anonymity because of the sensitivity of the information. Other police officials in Kashmir supported his account.

The senior officer said Ahmed was a Special Police Officer, part of a semiofficial counterinsurgency network whose members are usually drawn from former militants.

"Sometimes we use our men engaged in counterinsurgency ops to provide SIM cards to the (militant) outfits so that we track their plans down," said the officer.

Police said Ahmed was recruited to the force after his brother was killed five years ago, allegedly by Lashkar-e-Taiba militants for being a police informer.

About a dozen Islamic militant groups have been fighting in Kashmir since 1989, seeking independence from mainly Hindu India or a union with Muslim-majority Pakistan.

India and Pakistan have fought two of their three wars over the Himalayan region, which is divided between them and claimed by both in its entirety.

The Calcutta police denied the claims from Srinagar. "This is not true," said Kumar.