The Mahatma Gandhi Marg turned into a battlefield as the khaki-clad homeguards marched from the Master Canteen Square towards the assembly after breaking three police barricades, police sources said.
A lathi-charge was resorted to after a water cannon and teargas squibs proved ineffective, the sources said.
Ten homeguards were injured in the lathicharge, they said.
City Commissioner of Police Sunil Ray said disciplinary action would be taken against the homeguards for demonstrating in uniform.
They said the homeguards took to the streets as their six demands remained unfulfilled even after six months.
The six-point charter of demands included fulfilment of service conditions and hike in wages.
Opposition Congress condemned the police action as an attempt to suppress an agitation for "just" demands.
OPCC General secretary Arya Kumar Gyanendra said in a statement that Congress supported the demands of the homeguards and assured to fulfil them if the party came to power.
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