Seventeen sailors and at least 50 Tigers died in the two-and-half hour gunfight some 50 km out at sea from the LTTE stronghold in the north of the island. The ship was also carrying a member of the Nordic Sri Lanka Monitoring Mission.
Later, the Air Force bombed and strafed the rebel held region in the north, in what it described as a 'limited response' to the LTTE attack at sea.
On Friday, the LTTE accused the navy of using SLMM officials as "human shields."
"SLMM monitors are used by the Sri Lankan Navy as human shields,"
Sri Lankan Military spokesman P D K Dassanayake said that the Navy lost the Dvora (fast attack craft) when the LTTE rammed a explosive-laden boat into it, but managed "to save Pearl Cruise II and the 710 men aboard it."