Curfew was imposed and Army called out in Kishtwar district of Jammu region on Friday following clashes between people belonging to two communities that left at least 15 people injured.
The clashes broke out in Kuleed area and soon spread in the district, police said, adding the two groups indulged in stone-pelting and arson in which 10 shops were set on fire.
Curfew has been imposed in the area, divisional commissioner, Jammu, Shant Manu said.
Police and CRPF personnel rushed to the area and used batons and teargas besides firing in the air to disperse the warring mobs gathered in various parts of the district, 226km from here.
The situation turned ugly when police was fired upon from homes, the sources said, adding a list of village defence committee members was drawn up quickly so that the arms given to them could be withdrawn.
According to the reports, a group of people, raising anti-national slogans after the Eid prayers, was attacked by another section of people in Kuleed area leading to tension.
Among the injured, one, identified as Rohit Kumar, was hospitalised with a bullet injury in his arm and abdomen.
Besides the shops, a truck and a hotel belonging to a kin of MLC were burnt down in the arson.
Jammu and Kashmir chief minister Omar Abdullah directed senior state and civil officials including the police chief Ashok Prasad and chief secretary Mohammad Iqbal Khandey to rush to the scene and try and control the situation.