The vessel, identified as the Farha III, was believed to be crewed by Jordanian and Egyptian nationals and was carrying 14,000 tonnes of rice from Kakinada, India to Durban in South Africa.
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"We noticed a ship drifting in our waters and we also saw suspicious activity of the Sri Lankan navy," Liberation Tigers of Tamil Eelam (LTTE) spokesman Rasiah Ilanthiriyan said by telephone from the rebel-held north.
"We boarded the ship to rescue the crew," he said, adding the seamen were being taken to safety despite rough seas while the ship was dangerously too close to the shore.
But Sri Lanka's defence ministry said a distress message indicating that the vessel was "under armed pirate attack" was received by the Maritime Rescue Coordinating Centre in Britain which conveyed it to the Sri Lankan naval authorities.
"This armed pirate act by the LTTE is a clear violation of the international maritime laws and the Navy has found it difficult to react due to the presence of the ship's crew," the m