Deputy Commissioner K.C. Chaman said six soldiers were still trapped in the debris and a rescue operation by the National Disaster Response Force (NDRF), the Army and the state police was on to save them.
The 28 people who were rescued comprised 17 soldiers and 11 civil.
The dead included the building owner's wife.
Chief Minister Jai Ram Thakur along with his Cabinet Minister Rajiv Saizal, MP Suresh Kashyap and state Assembly Speaker Rajiv Bindal reached the spot and supervised the rescue operation.
Later, they met the injured.
Thakur, who has ordered a magisterial probe into the incident, said as per his information the structure was not raised as per building specifications.
He ordered the registration of an FIR against the building owner Shail Kumar, who was away when the structure collapsed.
According to officials, the incident took place at around 4 p.m. on Sunday when soldiers, belonging to the Assam Rifles of nearby Dagshai Cantonment, were having their party at the roadside eatery-cum-residential complex which caved in due to heavy rain.
Both soldiers and civil were present in the building, located on the Kumarhatti-Nahan road, around 55 km from Shimla.
The Deputy Commissioner said first the fourth floor of the building collapsed. Then the entire building caved in.
Locals blamed unscientific construction methods and violations in the granting of construction-sanction for the building collapse.
( With inputs from IANS )