The cause of the explosion that took place around 5.45 am was not immediately known, amid suspicion that somebody was carrying a grenade on the bus that went off.
"Among the passengers were seven Army personnel and five Air Force personnel. The condition of two Army personnel is reportedly critical," the Army said in a statement.
The injured which included seven civilians have been hospitalised.
"The Army denies any terrorist involvement in the incident. Police investigations are in progress," it said.
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However, Daily Mirror newspaper quoting the spokesman said "the explosion cannot be ruled out as an act of terrorism as of yet. Nevertheless, a highly explosive substance inside the bus may have caused the explosion. The cause can be ruled out after the government analyst inspects the scene."
Atapattu said the police and the military are conducting separate investigations.
Sri Lanka saw a brutal civil war involving the Liberation Tigers of Tamil Eelam (LTTE) and had witnessed large scale violence during the 30-year-long separatist movement that claimed over 100,000 lives.
There have been hardly any reports of attacks on the military ever since.
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