The violence started at a hotel over a trivial matter and spread to Machibazar and Madhavpura areas of the city, officials said.
A senior state official told PTI tonight that the police fired after violence erupted between two groups in Madhavpura area of the town in which three persons were killed.
As many as 48 policemen were injured in the violence, the official said. The condition of two people, including a policeman, is serious, he said.
The cause of the clash was reportedly a tiff over non-payment of a hotel bill by a group of four people, the official said.
After they were beaten up by the hotel staff for failing to pay the bill, they went away and returned with a large group after which the violence escalated, the official said.
The situation is now under control, he said.
Maharashtra Chief Minister Prithviraj Chavan and Home Minister R R Patil have appealed for maintaining peace in the area.