A Sri Lankan sailor (C) stands on a boat anchored at the fishing harbour of Negombo from where many have leave the island illegally and travel to Australia or New Zealand in search of jobs
A fishing trawler was detected with the passengers, including 11 women and 13 children, off the island's north-eastern coast of Mullaittivu, navy spokesman Kosala Warnakulasuriya said.
"The trawler was intercepted by navy patrol craft 20 nautical miles east of Mullaittivu," Warnakulasuriya said, adding that the 54 people onboard were handed over to police for further investigations.
He said the suspects told them that they were trying to leave for Australia, despite Canberra announcing last year that they will no longer allow even genuine asylum seekers the right to settle in Australia, moving them to Papua New Guinea instead.
In February, Sri Lanka's police had arrested 75 people who were trying to illegally travel by boat to New Zealand.
The last detection of significant boat traffic to Australia was in October, when 70 Sri Lankans were arrested by the navy off the island's southern coast of Galle, the navy said.
Sri Lankan asylum-seekers, many of whom claim persecution at home over Sri Lanka's Tamil separatist conflict, have tried to travel to New Zealand by boat in the past, but Australia has been a more favoured destination.
Sri Lankan police have arrested dozens of people for organising illegal boat trips to Australia, including several naval personnel -- an embarrassment for Colombo, which had maintained there was no senior-level official collusion with the smugglers.
Australia has sent back dozens of Sri Lankan nationals who tried to enter the country illegally.
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