A division bench comprising Acting Chief Justice Antony Dominic and Justice A Muhamed Mustaque refused to stay the single judge order while admitting an appeal filed by the Centre.
In the appeal, the government stated that the film though selected by the jury had not secured the exemption as required by the Panorama regulation in the absence of any certification from the Central Board of Film Certification.
It was also contended by the Centre that inclusion of the film is likely to upset the arrangements of the 48th IFFI, which comes to a close on November 28.
'S Durga' narrates the horrifying experience of a hitchhiking couple.
The director of the film Sanal Kumar Sasidharan moved the court after the film was dropped from the Indian Panorama section of the festival along with the Marathi film "Nude".
According to the petitioner, the I&B Ministry's decision to overrule the recommendation of the 13-member jury and pull out the two films was "unconstitutional".
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