Khan,
Rotate the piston 45* (the piston with the groove) and compress it as much as you can. When you do this, make sure that the e-brake cable is not pulling on the lever on the indirect (inboard) piston. The lever should be resting on the plastic stop. There should be minimal drag on the rotor and you should be able to easily rotate it (the rotor) by hand.
Also check the clearance between the rotor and the caliper. This is adjusted with shims between the caliper mounting tabs and the upright mounting tabs.
John
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