The seven naval personnel include former spokesman Commander DKP Dassanayake who was the Navy's Director (operations) from 2008 to 2009 when the abductions took place, police spokesman Ruwan Gunasekera said.
At least 28 abductions and disappearances of individuals have been reported and the group of Naval men have been arrested for their responsibility to 11 of them, Gunasekera said.
Responding to criticism that the arrests were arbitrary, Gunasekera said: "We have gathered firm evidence by way of statements and through phone records of the Navy group who had demanded money from the relatives of those abducted.
A probe was launched following a complaint by former Navy chief Wasantha Karannagoda against his personal assistant's alleged involvement in abductions, Gunasekera said.
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Disappearance of people figured high in the allegations of human rights abuses against the regime of former president and strongman Mahinda Rajapaksa, whose nearly a decade-long rule was ended by President Maithripala Sirisena in 2015.
Rajapaksa termed the arrest of the Navy personnel as victimising government soldiers who under him had ended the three decades-long conflict by the LTTE.
Sri Lanka's human rights record particularly over the impunity enjoyed by law enforcement officers has been the subject of international condemnation.
The UN Human Rights Council has called for an international probe into the alleged war crimes during the military conflict with the LTTE that ended in 2009.
Sri Lanka is averse to setting up of an international hybrid court with local and foreign judges to investigate the alleged war crimes committed by the government troops and the LTTE in the last phase of the conflict.