The Ankola police raided a resort at Honnebylu, five km from the town, and arrested 14 people as they were allegedly participating in a rave party on Saturday night.
Cash amounting to Rs 1.23 lakh, 10 mobile phones and loudspeakers have been seized from them.
However, the arrested were released on bail at dawn giving rise to suspicions.
The arrested include women in the age group of 20 to 35, who were allegedly performing obscene dances at the event which was held at the Honeybeach resort.
They are Sudha Raju Kolavi of Shivanandanagar in Bagalkot, Deepa Arun Hiremath of Balajinagar in Hubli, Sushma Tejanarayan Subba and Roji Lal Bahadur Hamal from Kathmandu in Nepal.
Kaikanda Rajkumar Jayant Shetty, Arif Inayatullah, Harish Sudharaya Shetty, Vinod Bhagwan Das of Mangalore, Sandeep Balakrishna Shetty of Sabaripet in Karkala, Sachin Balakrishna Shetty of Gurupura in Mangalore, Yeshwant Shekhar Poojary of Kannikamba in Mangalore, Madhu Venkappa Shetty of Bajpe in Mangalore and Venkataramana Narayana Nayak and Harish Ramachandra Nayak of Ankola (the last two are the owners of the resort) are the other arrested.
The raid was conducted following information that scantily-clad women were dancing to blaring music being played out on loudspeakers around 11.30 pm. The raid was conducted as per the instructions of Deputy Superintendent of Police Ullas Vernekar.
Inspector S Vijay Prasad, sub inspector Joy Antony and others were in the raid team.
Meanwhile, one of the resort owners, Venkataramana Narayana Nayak, has clarified that no rave party was being conducted at the resort and that tourists had only organised a cultural programme by professional artistes.