The navy engaged a flotilla of rebel boats off the northeastern coast in a pre-dawn clash, sinking two craft together with at least 15 people, navy spokesman Commander D.K.P. Dassanayake said.

The three-hour confrontation with the Liberation Tigers of Tamil Eelam (LTTE) off Pulmoddai wounded at least two navy sailors, he said.

"There were about 14 Sea Tiger boats. The navy destabilised two of the boats. We believe about 15 to 16 people were there in the two boats that were destroyed," Dassanayake said.

In southern waters, naval patrol craft fired at a "large ship" which exploded and burnt for over two hours, Dassanayake said.

"We contacted the vessel on radio and the information they gave us turned out to be wrong," he said. "The vessel had no identification marks and after we fired warning shots, they began to attack our patrol craft. We retaliated."

He said the 75-metre long vessel was believed to be carrying a large haul of arms for the Tigers. However, there was no immediate word from the rebels.

Military spokesman Prasad Samarasinghe said three suspected Tiger rebels were also shot dead by a foot patrol of the elite police Special Task Force commandos in the northwest district of Mannar early yesterday.

The land and sea battles came a day after the Tigers shelled two military helicopters carrying ambassadors from France, Germany, Italy, Japan, the United States, European Union and the heads of UN agencies.