Maharashtra Water Resources Minister Girish Mahajan has announced a probe into the incident.
The Tivare dam had started overflowing after heavy rain and breached around 9.30 p.m., Resident Deputy Collector Datta Bhadakawad told .
As millions of litres of water gushed out unleashed, it resulted in a flood-like situation, inundating at least seven villages downstream in its path, besides a dozen homes in Bhendewadi with around 14 families, which were washed away.
The affected villages include Daadar, Akle, Riktoli, Ovali, Kalkavne, Nandivase, which have an estimated total population of around 3,000, and are situated in a hilly region, around 90 kms from the district headquarters.
Disaster Management Officer Ajay Suryawanshi said all the victims were reported from Bhendewadi hamlet, which was adjacent to the dam wall, and there were no casualties from any of the villages downstream.
"The villages were inundated last night, but now the situation is normal as the dam waters receded and there is a lull in the rain," he added.
Of the people reported missing, the police have recovered seven bodies from the gushing water so far and a massive search is on for the remaining still untraced. Around 20 vehicles belonging to the villagers have also been washed away.
Teams of the fire brigade and the National Disaster Response Force from Pune and Sindhudurg, besides local volunteers, have launched rescue operations, and top civil and police officials have rushed to the tragedy spot.
"The locals had lodged complaints about leakages from the dam and demanded repairs. They were told that repairs had been carried out, but now this tragedy has occurred. We shall probe this thoroughly," Mahajan told mediapersons.
The dam was built in the year 2000 and Bhadakawad said its capacity was 2,452 TCM, making it a small irrigation project.
Large parts of Maharashtra have been battered with heavy rains in the past five days, and on Tuesday at least 45 people were killed in rain-related incidents across the state.
( With inputs from IANS )