While maintaining a tight cordon and floodlighting the entire area in Lal Chowk the paramilitary forces have engaged the fidayeens in a sustained gun battle.

"The CRPF troops will resume the operation at first light Tuesday morning. Our priority is to first rescue all the civilians still inside the two hotels," CRPF PRO Rakesh Kumar Singh told rediff.com.

Inspector general of CRPF Ranjit Sinha said on phone Monday evening that suicide militants first attacked a mobile bunker of the CRPF with grenades and later sprayed bullets before entering the two hotel buildings.

"In the initial attack two civilians and a CRPF trooper were killed and fourteen others including three CRPF troopers were injured. A Japanese photojournalist, Takashi Sukura is also injured in this attack. We have surrounded the Punjab and Peak View Hotels in Lal Chowk area and engaged the holed up militants in a gun battle," Sinha said.

He said," Another critically injured CRPF trooper succumbed to his injuries in the hospital Monday evening."

A caller identifying himself as Abu Osama, the spokesman of the Al-Mansoorian militant group, called up a local news agency office in Srinagar [Images] to claim responsibility for this attack. He also said four members of the Fidayeen squad of the group had carried out the attack.

"I was inside my shop when we heard a loud bang. Then there was firing and I pulled down the shutter of my shop. There were some shoppers inside my shop too. After nearly half an hour, we managed to run out of the shop," said Fayaz Ahmad, a shopkeeper in the area.

Senior police and paramilitary force officers are supervising the Lal Chowk operation.

Shopkeepers in the entire city centre downed their shutters and rushed home early. Traffic also deserted the streets. Intermittent firing exchanges are still continuing.