Indian army chief General V.K. Singh told reporters that the workers were illegally building a shelter at Demchok in the Ladakh region of Indian Kashmir when the Chinese military patrol threatened them in September or October.

The borders between India and China have been the subject of 14 rounds of fruitless talks since 1962, when the two nations fought a brief but a brutal war over the issue.

The Press Trust of India (PTI) news agency said the Chinese troops told the builders to stop work and shouted at them.

"Unfortunately, some people for various local gains have pushed construction activity in that area," Singh said, dismissing PTI reports that the building was a transport shelter officially sanctioned by India.

India says China is illegally occupying 38,000 square kilometres (15,000 square miles) of its northwestern territory, while Beijing claims a 90,000-square-kilometre chunk of Arunachal Pradesh in northeast India.

The incident highlighted how the disputed borders are a focus for friction between the two fast-developing Asian giants.

Chinese Prime Minister Wen Jiabao met his Indian counterpart Manmohan Singh in New Delhi last month and reaffirmed a 1993 pledge to maintain peace in border areas and continue talks.

Officials at the Chinese foreign ministry in Beijing were not immediately available for comment.