The outfit, Sangharsh, had accused the organisers of playing with the nationalist sentiment of people of India, at a time of tension with Pakistan after the Uri terror attack.
They had also sought police permission to protest over the screening of the 1958 Pakistani film at the 18th Jio MAMI Mumbai Film Festival with Star, which begins from October 20.
"Given the current situation, the Jio MAMI 18th Mumbai Film Festival with Star has decided not to programme Jago Hua Savera as part of the Restored Classics Section," organisers of the festival said in a statement.
Directed by AJ Kardar, Jago Hua Savera was selected as the entry from Pakistan for the Best Foreign Language Film at the 32nd Academy Awards in 1960.
The film was co-produced during the days of undivided Pakistan (now independent Pakistan and Bangladesh) and shot in Dhaka.
It tells the tale of life in a small fishing village where everyone dreams of owning their own boat.
The film was set to be screened in the 'restored classic' section of the festival, which is chaired by superstar Aamir Khan's wife Kiran Rao.
The 18th edition of the festival will be held from October 20-27 in which over 180 films from 54 countries would be screened at several spots across the megapolis.
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