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Mudrarakshasa legend

According to the Mudrarakshasa version, the Emperor Nanda once removed Chanakya from the "first seat of the empire" (this possibly refers to Chanakya's expulsion from the emperor's assembly). For this reason, Chanakya vowed not to tie his top knot (shikha) until the complete destruction of Nanda. Chanakya made a plan to dethrone Nanda, and replace him with Chandragupta, his son by a lesser empress. Chanakya engineered Chandragupta's alliance with another powerful king Parvateshvara (or Parvata), and the two rulers agreed to divide Nanda's territory after subjugating him. Their allied army included Bahlika, Kirata, Parasika, Kamboja, Shaka, and Yavana soldiers. The army invaded Pataliputra (Kusumapura) and defeated the Nandas. Parvata is identified with King Porus by some scholars.

Nanda's prime minister Rakshasa escaped Pataliputra, and continued resisting the invaders. He sent a vishakanya (poison girl) to assassinate Chandragupta. Chanakya had this girl assassinate Parvata instead, with the blame going to Rakshasa. However, Parvata's son Malayaketu learned the truth about his father's death and defected to Rakshasa's camp. Chanakya's spy Bhagurayana accompanied Malayaketu, pretending to be his friend.

Rakshasa continued to plot Chandragupta's death, but all his plans were foiled by Chanakya. For example, once Rakshasa arranged for assassins to be transported to Chandragupta's bedroom via a tunnel. Chanakya became aware of them by noticing a trail of ants carrying the leftovers of their food. He then arranged for the assassins to be burned to death.

Meanwhile, Parvata's brother Vairodhaka became the ruler of his emperor. Chanakya convinced him that Rakshasa was responsible for killing his brother, and agreed to share half of Nanda's emperor with him. Secretly, however, Chanakya hatched a plan to get Vairodhaka killed. He knew that the chief architect of Pataliputra was a Rakshasa loyalist. He asked this architect to build a triumphal arch for Chandragupta's procession to the imperial palace. He arranged the procession to be held at midnight citing astrological reasons, but actually to ensure poor visibility. He then invited Vairodhaka to lead the procession on Chandragupta's elephant, and accompanied by Chandragupta's bodyguards. As expected, Rakshasa's loyalists arranged for the arch to fall on who they thought was Chandragupta. Vairodhaka was killed, and once again, the assassination was blamed on Rakshasa.

Malayaketu and Rakshasa then formed an alliance with five kings: Chiravarman of Kauluta (Kulu), Meghaksha of Parasika, Narasimha of Malaya, Pushkaraksha of Kashmira, and Sindhusena of Saindhava. This allied army also included soldiers from Chedi, Gandhara, Hunas, Khasa, Magadha, Shaka, and Yavana territories.

In Pataliputra, Chanakya's agent informed him that three Rakshasa loyalists remained in the capital: the Jain monk Jiva-siddhi, the scribe Shakata-dasa and the jewellers' guild chief Chandana-dasa. Of these, Jiva-siddhi was actually a spy of Chanakya, unknown to his other spies. Chandana-dasa sheltered Rakshasa's wife, who once unknowingly dropped her husband's signet-ring (mudra). Chanakya's agent got hold of this signet-ring, and brought it to Chanakya. Using this signet ring, Chanakya sent a letter to Malayaketu warning him that his allies were treacherous. Chanakya also asked some of Chandragupta's princes to fake defection to Malayaketu's camp. In addition, Chanakya ordered Shakata-dasa's murder, but had him 'rescued' by Siddharthaka, a spy pretending to be an agent of Chandana-dasa. Chanakya's spy then took Shakata-dasa to Rakshasa.

When Shakata-dasa and his 'rescuer' Siddharthaka reached Rakshasa, Siddharthaka presented him the signet-ring, claiming to have found it at Chandana-dasa's home. As a reward, Rakshasa gave him some jewels that Malayaketu had gifted him. Sometime after this, another of Chanakya's agents, disguised as a jeweller, sold Parvata's jewels to Rakshasa.

Sometime later, Rakshasa sent his spies disguised as musicians to Chandragupta's court. But Chanakya knew all about Rakshasa's plans thanks to his spies. In front of Rakshasa's spies, Chanakya and Chandragupta feigned an angry argument. Chandragupta pretended to dismiss Chanakya, and declared that Rakshasa would make a better minister. Meanwhile, Malayaketu had a conversation with Chanakya's spy Bhagurayana while approaching Rakshasa's house. Bhagurayana made Malayaketu distrustful of Rakshasa, by saying that Rakshasa hated only Chanakya, and would be willing to serve Nanda's son Chandragupta. Shortly after this, a messenger came to Rakshasa's house and informed him that Chandragupta had dismissed Chanakya while praising him. This convinced Malayaketu that Rakashasa could not be trusted.

Malayaketu then decided to invade Pataliputra without Rakshasa by his side. He consulted the Jain monk Jiva-siddhi to decide an auspicious time for beginning the march. Jiva-siddhi, a spy of Chanakya, told him that he could start immediately. Jiva-siddhi also convinced him that Rakshasa was responsible for his father's death, but Bhagurayana persuaded him not to harm Rakshasa. Shortly after, Chanakya's spy Siddharthaka pretended to get caught with a fake letter addressed to Chandragupta by Rakshasa. Wearing the jewels given by Rakshasa, he pretended to be an agent of Rakshasa. The letter, sealed with Rakshasa's signet-ring, informed Chandragupta that Rakshasa only wished to replace Chanakya as the prime minister. It also stated that five of Malayaketu's allies were willing to defect to Chandragupta in return for land and wealth. An angry Malayaketu summoned Rakshasa, who arrived wearing Parvata's jewels that Chanakya's agent had sold him. When Malayaketu saw Rakshasa wearing his father's jewels, he was convinced that there was indeed a treacherous plan against him. He executed his five allies in a brutal manner.

The rest of Malayaketu's allies deserted him, disgusted at his treatment of the five slayed allies. Rakshasa managed to escape, tracked by Chanakya's spies. One of Chanakya's spies, disguised as a friend of Chandana-dasa, got in touch with him. He told Rakshasa that Chandana-dasa was about to be executed for refusing to divulge the location of Rakshasa's family. On hearing this, Rakshasa rushed to Pataliputra to surrender and save the life of his loyal friend Chandana-dasa. When he reached Pataliputra, Chanakya, pleased with his loyalty to Chandana-dasa, offered him clemency. Rakshasa pledged allegiance to Chandragupta and agreed to be his prime minister, in return for release of Chandana-dasa and a pardon for Malayaketu. Chanakya then bound his top knot, having achieved his objective, and retired.