Posters accusing a Congress councillor of an alleged exodus of a Hindu family in the Kishanpole area here triggered a row, following which police were deployed, officials said on Saturday.
Recently, a Hindu sold his house near Purohito Ka Chowk to a Muslim family.
Some people put up posters alleging the "exodus of Hindu families" in Kishanpole and blamed Congress councillor Fareed Quereshi for it.
DCP (North) Rashi Dogra Dudi said the property papers were checked and there was nothing illegal.
"We will register a case against those who put up posters under IPC 153A (promoting enmity between different groups on grounds of religion)," he said.
Locals claimed that the property owner sold the house to Quereshi's cousin even as Hindu families were willing to buy it.
When contacted, Qureshi denied the allegations of the exodus and said Hindus and Muslims have been living in peace in the area.
He accused the BJP of instigating locals.
"In his statement to police, the property owner has said that he did not find a buyer willing to pay the desired amount (for the property). And when he finally found one, he sold the property. There was no pressure on him," Quereshi said.