Two army personnel were killed in the incident that took place yesterday.
Army Spokesman J S Brar today said that an inquiry has been ordered to ascertain the cause of the incident.
Troops of 53 Rashtriya Rifles had set up a vehicle check post at Chattergam chowk, 20 kms from here, in Chadoora area of Budgam following information about movement of militants through the area.
A team of 35 Rashtriya Rifles men travelling in a civilian vehicle did not stop at the check point, giving rise to suspicion among the troops at the check post, who opened fire.
Sepoy Ghulam Rasool Sheikh, Naik Setien Tao of 25 Rashtriya Rifles and Territorial Army driver Abdul Rauf were wounded and admitted to the 92 Base Hospital at Badamibagh Army headquarters where Sheikh and Rauf succumbed.