Rafiq Hussain, 40, Shahid Ahmad, 49, and Nadim Ahmad, 40, were arrested Saturday during a raid on a spa and beauty parlour in a key area of the capital that had been under surveillance following complaints by locals, police said.
"We raided the Natural Spa and Beauty Parlour located near the Yak and Yeti hotel," inspector Krishna Prasad Koirala told IANS. "The three Indian men were caught in compromising positions."
Six Nepali women, including the owner of the spa, were also arrested. The other five women, in their 20s, reportedly said they had come for beauty treatment while police claimed they were commercial sex workers.
The three men told police they were tourists who had arrived from Lucknow, the capital of India's Uttar Pradesh state.
On Sunday, the men were taken to the Kathmandu chief district officer's office where police said they would seek at least a week's custody to complete investigations.
Nepal is planning to draw one million tourists this year and seeks to get at least 265,000 Indian tourists. Though Tourism Minister Sharad Singh Bhandari has ruled out legalising prostitution, Nepal however is increasingly becoming a key South Asian destination for sex tourists.
Last year, police busted several well-organised sex rackets in the capital that involved flying call girls from India, China and European countries.
To the concern of child right organisations, Nepal, with its lax laws, is also becoming a growing preying ground for paedophiles, some of whom even seek to run NGOs for children.
In November, the Assize Court of Paris slapped a 10-year jail term on French citizen Jean Jacques Haye, who ran a children's home in Kathmandu in the 1980s-90s, where he abused eight children for almost 13 years.
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