The Iraqi government cancelled the licence of a US private security firm after its employees were allegedly involved in a shootout that left behind at least eight dead and 13 injured, media informed Monday.

According to a statement released by the interior ministry, the North Carolina-based Blackwater security company remained without the licence to operate in Iraq after several of its employees were reportedly involved in a fire exchange Sunday in Baghdad.

Apparently a car bomb went off in a crowded area near a mosque in the al-Mansour district located in the western side of Iraq’s capital. The explosion took ten lives and injured twenty persons, and was followed by an attack with mortars, which triggered the intense gunbattle.

Local sources said security personnel employed by Blackwater indiscriminately opened fire after the explosions and killed innocent bystanders.

According to the US State Department, a diplomatic convoy passed through an area adjacent to the heavily-fortified Green Zone when the explosive device went off.

“There was a firefight, we believe some innocent life was lost. Nobody wants to see that. But I can't tell you who was responsible for that,” spokesman Sean McCormack said.

McCormack added that US Secretary of State Condoleezza Rice is going to call Iraqi Premier Nuri al-Maliki to “express regret for the loss of innocent life.” The Iraqi leader said Sunday’s incident was “a criminal act” and pledged to bring to justice the perpetrators.

Several US private security firms are currently operating in the war-torn country, most of them providing security for diplomats, politicians and Iraqi companies. The security guards have been often criticized for their actions, critics saying some of them are not properly trained and are heavily armed.

In other developments, a car bomb exploded Monday in Sadr City near a Shiite mosque and killed at least four persons, media reported.

Other reports said ten people died and at least a dozen were injured when the blast occurred, but security forces did not confirm those news. The suburb district is located in eastern Baghdad and is mostly inhabited by Shiites.

Meanwhile, two policemen and three civilians were injured in western Baghdad when a roadside bomb went off as a police patrol passed by, security and media sources informed.

An army barrack was targeted by a bomb attack in Hillah, 100 kilometres south of Baghdad. At least ten Iraqi soldiers were injured, three of them being in critical condition, military sources said.