The Central Reserve Police Force lost two deputy commandants when militants attacked the headquarters of the 94 Battalion in the Hotel York complex in Srinagar late on Saturday night.

The two militants were gunned down early Sunday morning after security forces stormed the building. Seven CRPF personnel, including the commanding officer of the battalion, were wounded.

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"Security forces gunned down one of the militants early today. The other had been shot dead last night. We have searched the complex," a police officer told rediff.com.

"The duo had managed to enter the complex from the rear side after hurling several grenades and firing at the CRPF personnel guarding the complex.

Reinforcements were immediately rushed to the spot and the area was surrounded. The militants were engaged in an encounter," the officer said.

"The deafening sounds of explosions and gunfire kept us awake the whole night. This is Kashmir," said Mohammad Ashraf, a bank employee who lives close to the site of the encounter.

The area is where almost all the hotels and the most sought after house boats are located.