The killing spree over the weekend on the outskirts of this Goa capital ended Monday with the arrest of 54-year-old Fernandes, a small time contractor who allegedly tried to wipe out the family from Maharashtra who worked for him as labourers.
The traumatised six-year-old girl and four-year-old boy were allegedly thrown off a cliff by Fernandes and his associate Ramesh Bagwe but were rescued and are now undergoing treatment in hospital.
Both Fernandes and Bagwe have been arrested, said Deputy Inspector General of Police O.P. Mishra.
"Luckily, the two children survived despite the fact that he tried to kill them too by throwing them off a cliff in the forests of Mollem," Mishra said.
The discovery of the two injured children by a samaritan brought the ghastly incident to light, he said.
Recounting the events, police said Shivaji Naik, 40, one of the many thousand labourers from the nearby Kolhapur district of Maharashtra, got into a tiff with his employer Fernandes at Ribander on the outskirts of Panaji on the evening of May 11.
The argument over money got so bitter that Fernandes along with his accomplice Bagwe killed him and buried the corpse with the help of a mechanical excavator.
But this was only the beginning of the killing spree, according to the police.
When Shivaji's wife Sujata came asking for her husband the next morning, Fernandes allegedly told her that her husband had met with an accident and asked her to come along to the hospital with the children.
"They (Fernandes and Bagwe) took her around for a long time in a vehicle. Their plan was to kill her and dispose of her body," Mishra said.
They did this by strangulating her and pushing her off a cliff in the forested area at Mollem, near Goa's south eastern border.
"They tried to kill the crying children too by throwing them off the cliff but they survived somehow," the official said.
The children were later spotted by a passerby who tipped the police off about the incident, which eventually resulted in the arrest of both Fernandes and Bagwe late on Monday.
Both children have been admitted to a local hospital for treatment and are being counselled due to the trauma they were subjected to, police said.