Ethnic Indian activists in Malaysia vowed to go ahead with a weekend protest to support a lawsuit against former colonial power Britain despite a police ban and the arrest of three of their leaders.

The lawsuit filed earlier this year seeks four trillion dollars compensation for the estimated two million ethnic Indians whose ancestors were brought over here as labourers by Britain in the 1800s.

The activists plan to gather thousands of people on Sunday in front of the British High Commission (embassy) to denounce what they say is the continuing discrimination and marginalisation of Indians in Malaysia, said P. Waythamoorthy, chairman of Hindraf, the group organising the protest.

Since Thursday, police have set up roadblocks in the capital's narrow streets, and on Friday, three Hindraf leaders, including Waythamoorthy, were arrested.

All three were offered bail but Waythamoorthy refused and vowed to begin a hunger strike in jail.

"This is a conspiracy of the state to frustrate a peaceful protest in which we are seeking justice," Waythamoorthy told AFP as he was being escorted to the Sungai Buloh prison, north of the capital Kuala Lumpur.

"The planned protest will continue and I will go on a hunger strike in jail," he said.

Organisers intend to submit a petition to the British mission asking Queen Elizabeth to appoint a lawyer to represent ethnic Indian Malaysians in the lawsuit against Britain.

Ismail Omar, deputy inspector general of police, said the Hindraf leaders were arrested under the Sedition Act and that at least 4,000 police officers would be deployed on Sunday to ensure public order.

"I advise the public especially supporters not to attend the event on Sunday. Roadblocks have been set up in Kuala Lumpur and the main reason is to detain troublemakers," he said.

Opposition lawmakers have demanded police end the street blockade and allow the rally.

Police have also warned that protesters may raise sensitive racial issues, which could spark clashes. In 1969, deadly race riots broke out between Malays and Chinese with hundreds killed.

Protests are rare in Malaysia. The rally, if it happens, will be Malaysia's second street demonstration in a month.

The earlier protest attracted some 40,000 people who rallied for electoral reforms, with some being hit with tear gas and water canon by police.

Ethnic Indians, mainly Tamils, account for eight percent of Malaysia's population. About 80 percent of them are working class and lack skills, money and education.

Forming 60 percent of the nation's 27 million people, ethnic Malay Muslims make up the majority group, while 26 percent are Chinese.