I lost dye before the fight when the knights become hostile.
My initial dye is Red as below:
And here after dye was lost (it was also covered by multiple white pixel dots, and the whole robe was looking somehow wet):
After leaving dungeon area the dye was restored automatically on my robes.
Edit: I also had the same story of loosing dye in a favour of a "wet no dye effect" few days ago when playing my dragonknight, after completing dungeon and logging off to character menu:
For this DK the initial dye is Alchemist Bilious (super shiny gold colour).
Edited by Gargath on August 19, 2016 10:38AM PC EU (PL): 14 characters. ESO player since 06.08.2015. Farkas finest quote: "Some people don't think I'm smart. Those people get my fist. But you, I like."