Everything we know about what happened inside Inflation nightclub on Friday night.

Management at the Melbourne nightclub where a couple was shot by police are claiming the incident could have been avoided if police only “cared to listen”.

Zita Sukys, 37, and her partner, 35-year-old Dale Ewins were attending a Saints and Sinners themed swingers party at Inflation nightclub on King Street together on Friday night, dressed as the well-known comic book characters, Harley Quinn and The Joker. Part of Ewins’ costume was what is believed to be a toy gun.

Hours later Ewins, a father-of-one, was taken to Royal Melbourne Hospital under police guard in a critical condition having been shot by police in the torso.

Sukys, a mother-of-two, was shot in the leg by police and taken to The Alfred hospital.

Both are now in a stable condition.

So how did a couple dressed as DC comic book villains at a sex party wind up being shot by police shortly after 3am? Well, accounts vary slightly, but here's what we know so far.

What police say.

Police arrived at the club following a report of a man armed with a gun at the venue.

"Police called on the male, the male took the firearm from his pants and aimed it at police," Superintendent Lisa Hardeman said on Saturday.

She said the man did not drop the weapon when asked to do so.

“As a response police then fired a number of shots and a male and female were injured.”

“When a gun is aimed at you … and you ask somebody to drop the gun and that doesn’t happen, (you) need to make a split-second decision to protect yourself.

“Police don’t come to work to shoot people.”

Police have not yet confirmed whether the gun pointed at officers was fake.

“When a firearm is pointed at you in these circumstances, police are not sure at that stage whether it is real or an imitation,” Superintendent Hardeman said.

“That will be part of the investigation.”

When asked why the woman was shot, Superintendent Hardeman said, "The woman was in close proximity to the male... As [police] opened fire, she was also injured."

On Sunday Victoria Police Superintendent Philip Green said, "the Inflation incident will be, or is, and will remain subject to a full formal investigation and report and that will take its course."

This will be performed by the Armed Crime Squad and Professional Standards Command.

What the club owners say.

Inflation night club owner Martha Tsamis said in a statement posted to Facebook that staff at the club told police the gun Ewins was carrying was fake, saying they verified this upon his entry.

"Security verified that a plastic toy accessory was displayed to, and passed by security and this information was given to police on arrival," she said.

"No patron at the event came to us to inform our staff or security of this concern but apparently made an anonymous triple zero call to police.

"Staff and security have vehemently stated that at no time did they make a call to police for assistance, or indeed, saw the need to."

Tsamis added security personnel said there had not been any incidents of concern that night, and that they could handle any issues.

"But police rejected this advice, stormed in, fired three shots, and a taser, with the outcome being two people suffering from serious gunshot wounds."

According to Tsamis, Ewins was not pointing a gun at police, but was in a "compromising position" with his partner - performing a sex act - "which is a normal activity with the nature of this event."

She claimed police "overreacted" to the anonymous call and that they planned to ask IBAC to investigate the incident.

She said management and staff were "shaken" by the events of Saturday morning.

What a witness says.

A witness, Kim, told the Sunday Herald Sun 30 to 40 police walked into a dimly lit room "where the naughty stuff happens".

"They said, ‘put your weapon down’, and he went to reach a little plastic thing that was a part of his outfit saying it was nothing."

"Then they opened fire — bang, bang, bang — they didn’t even give him a chance."

The event and the club's history.

The Saints and Sinners Ball is an erotic fancy dress "adult" party which has also been described as a sex party and a swingers party.

The event's theme was "rockers, punks and goths" and according to the website it is "no-holds-barred fun where just about anything goes".

"There are open areas where people are talking, dancing, drinking, meeting, feeling and... there are more secluded areas where people can play a little more discretely."

It's believed Ewins and Sukys were in the latter area.

Inflation's owner Martha Tsamis said four of the pre-booked events are held each year at Inflation "and at other venues also from time to time".

"These events have been held for approximately 20 years at Inflation without any incident," Tsamis said.

However, the same can not be said for the infamous nightclub's other events.

Over the years, police have investigated claims of drug use and overdoses, using this as support for unsuccessful calls to reduce opening hours in 2014.  Then, in January six people were taken to hospital after it's believed they overdosed on a bad batch of drugs at one the club's Saturday night Cloud Nine events.

Tsamis has previously told the Herald Sun the club's management takes steps to create a safe venue.

"I sell alcohol, I don't sell drugs," Tsamis told the newspaper.

"I make money from alcohol and the door. There is no value for me to have people like that (on drugs) in my venue, that is why we report them.

"We run a very safe venue, we do ID scanning, have shatterproof glass, have double the amount of security, and I do everything possible to minimise the risk."

-With AAP.