Confirming the development to rediff.com, Additional Commissioner (Crime) Deven Bharti said: "Yes, we have solved the case. Seven persons have been arrested."
Home Minister R R Patil said three people were arrested from Rameswaram in Tamil Nadu, one from Solapur and three from Mumbai.
He identified two of the accused as Satish Kalya and Anil Waghmode.
"I have announced a reward of Rs 10 lakh for the Mumbai Crime Branch team for exemplary work they have done in the case," Patil said.
All seven accused are believd to be part of the Chhota Rajan gang. Police officials say that differences between the Rajan and the slain journalist may have led to the latter's killing.
The seven accused were produced before a judge at the Qila court in Mumbai and subsequently remanded to police custody till July 4.
Dey, who worked as Editor (Special Investigation) in Mid-Day, was shot dead by unidentified persons in suburban Powai on June 11 afternoon. He had extensively covered crime and underworld over two decades.
Dey was shot at from close range, reportedly by professionals, and a total of 5 bullets entered his body.
The murder of the veteran scribe had sent shockwaves and the Mumbai police were probing the case from all angles.
The police had also examined Dey's laptop and a hard disk besides some important documents to get a lead in the sensational murder.
Various journalists' associations have been demanding a CBI probe, but it was ruled out by the Maharashtra government
The Bombay high court had recently directed the police to file a report by July 6 on the progress of investigations into Dey's murder.
Assistant commissioner of police (ACP) Anil Mahabole, who was in-charge of Azad Maidan division in south Mumbai, was also shunted out to the Local Arms Control Room in suburban Naigaon after his name cropped up in the case.
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