(CNN) -- At least 11 people were killed in shelling that erupted Wednesday when a Misrata-based militia loyal to the Libyan government attacked the rival city and former Moammar Gadhafi stronghold of Bani Walid.

Libyan militias and army troops have surrounded the hilly city for two weeks, awaiting orders to enter if militants loyal to Gadhafi inside the city failed to hand over a list of wanted men accused of kidnapping and torturing a Misrata fighter credited with capturing the late Libyan dictator last year.

Libya Shield fighters, one of the militias surrounding the city and working alongside defense ministry forces, advanced in the early morning hours and took positions overlooking the city center, the militia said in a statement, according to state-run Libya TV.

The fighters then shelled the city, killing at least seven people and wounding about 100 others, Col. Salem al-Wa'er, a spokesman for Bani Walid's fighters, said.

"That's not what we agreed on," al-Wa'er told local media. "We had agreed with the mediating elders to allow members of the regime's defense forces to enter the city so it can protect us from this militia, not allow it to shell us," he added.

Bani Walid fighters later responded with mortar rounds that killed four rivals -- two from Misrata and two from nearby Zlitan, according to Misrata medical sources.

There were no direct clashes between the two groups, a reporter for Libya TV said from the outskirts of the Bani Walid.

The military standoff stems from the death of a Libyan revolutionary fighter from Misrata credited with capturing Gadhafi in October 2011.

Omran Shaaban and two other fighters were kidnapped near Bani Walid in July. He was released two months later, at which point he was in bad shape physically. After being transferred to a hospital in France, Shaaban died September 24 of the aftereffects of gunshot wounds.

One day after his death, the country's General National Assembly authorized the Libyan ministries of defense and interior to use force, if necessary, to arrest those responsible for allegedly kidnapping and torturing Shaaban.

The National Assembly also called for the release of the others being detained in Bani Walid, giving those in the city 10 days to comply -- or else the North African nation's military would take action after October 5.

The following week, Libyan army troops and militia members from different parts of the nation -- including Misrata -- mobilized and surrounded Bani Walid. Bani Walid and Misrata have a longstanding rivalry.

On Wednesday, the Libyan army renewed its call on the people of Bani Walid to cooperate by handing over the wanted individuals to avoid further military escalation.

Yet fighters in Bani Walid remained defiant, calling the national assembly's decision illegitimate.

"We want to implement the assembly's decision. And we are ready to receive those who are wanted at any time," Col. Ali Elsheikhy, spokesman to the army's chief of staff, said.

"We could wait forever around Bani Walid if needed. But we have to end this (standoff)" Elsheikhy added.

The International Committee of the Red Cross and Amnesty International expressed concerns earlier this month about the tense situation in Bani Walid. The Red Cross said it delivered medical supplies following appeals from civilians in the city.

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CNN's Jomana Karadsheh contributed to this report.

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