"Islamic extremism is a problem. If you (writers) have to deal with it, then learn to speak the truth. If you don't have the courage to speak it, then better sit at your home and sell onions and tomatoes," Fatah said addressing the session on 'Religious Extremism and Contemporary Times'.
"Why Osama Bin Laden and Mullah Omar stayed in Pakistan? Why Dawood Ibrahim stays in Pakistan? Why doesn't he stay in Tunisia?" Fatah questioned.
The 65-year-old writer also said that after the partition, Gujarati, Kacchi, Sindhi and Balochi languages were "killed" in Karachi.
"Today in this city (Karachi) neither a single Gujarati writer is present nor is there any (Gujarati) newspaper... Parsis and Bohras have left the city permanently," he said.
"In India, states were created on the basis of language. But in our country, Pakistan, ban was imposed on Sindhi, Gujarati, Balochi and Pashto. Even a majority community language, Bengali, was banned," he said.
Urdu, which was born in India and had nothing to do with Pakistan, was imposed on Pakistanis, Fatah said, adding that Punjabi writers in Pakistan are forced to write in English.
However, Fatah's remarks did not go down well with Pakistani critic Mubin Mirza and poet Ambreen Haseeb, both of whom staged a walk-out from the venue.
"He (Fatah) came here to spread hatred against Pakistan. Just because of one Mullah Omar or Osama Bin Laden he cannot describe all the Pakistanis as terrorists. This is not fair. If he speaks against Pakistan, we will protest," Mirza said.
Dismissing the charge of killing local languages, Mirza said, "Three Gujarati newspapers are published from Karachi. Sindhi and Punjabi newspapers too are published. The writers in Karachi are running a campaign to promote different mother tongues."
Mirza also said that one shouldn't promote atmosphere of despair among the people, created by the situation and the politics, but "must keep the hope alive that India and Pakistan will ultimately be able to spread love" one day.
Ambreen also expressed strong displeasure over Fatah's speech. "Things will not be resolved by abusing each other. We have not arrived here to listen to abuse," she said.
Both of them later agreed not to boycott the festival after being requested by the organisers and took part in other sessions.
The festival will continue till November 22.