At least 24 people are being held by separatist rebels on Monday in or near the north-east Indian state of Tripura, according to the local police.
Twelve others managed to escape as the hostages were being taken to a hideout in the jungle.
Police say those who were kidnapped have now been taken to Bangladesh.
The rebels are members of a faction of the National Liberation Front of Tripura (NLFT), a banned organisation
who want an independent state.
Kidnapped and robbed
The incident happened when nearly 40 traders, mostly Bengalis, were heading to a market in two trucks when armed rebels forced them to stop at a road block created by felled trees.
Bengali settlers are frequently attacked by the rebels
Tripura police chief GM Srivastava told the BBC that the traders were robbed and most were kidnapped.
But 12 managed to escape while they were being taken to a NLFT base in the jungle, and they reported the abductions to a local police station.
Mr Srivastava said that the incident took place close to the border with Bangladesh, and that the NLFT has several bases in the border areas.
He said the state government was seeking the help of the Bangladesh Rifles in locating the hostages.
One of the traders who escaped told the BBC said that the hostages were heading towards the northern extremes of Chittagong Hill Tracts in Bangladesh.
A large contingent of police and paramilitary forces are patrolling a key road in Tripura's north district where the incident took place.
Once Tripura's strongest rebel group, the NLFT has seen an erosion in their ranks.
Mr Srivastava said the rebel group's main faction, led by its chairman Biswamohan Debbarma was responsible for Monday's kidnapping.
The BBC's Subir Bhaumik in Calcutta says that Mr Debbarma is upset over the desertion of hundreds of guerrillas from his faction of the NLFT.
Last month, 72 rebels surrendered to the authorities in Tripura.
They are reported to be fed up with life in the jungles and are running short of food. Mr Srivastava says that he expects more rebels to surrender soon.
More than 4,000 people have died in the state since 1980, and around the same number have been kidnapped.