The tiff erupted after Akhtar, who was in the audience at a packed venue, interjected during a session on God and Buddhism, saying he was an atheist and no religion gave equality to women and weaker sections.
"Discussing religion was like discussing which cave will be better to live. If you want to follow a religion, follow any religion. It does not matter. If you have decided to commit suicide, does it matter how you do it?" Akhtar said, triggering applause.
To this, a fuming Ilaiah, one of the speakers, said: "Real life is not like cinema, certainly not Hindi cinema. Crores of Buddhists in India have more knowledge than intellectuals."
As the mood in the gathering got tense, moderator Patrick French wound up the session despite protests from the audience.
The other two speakers were Hindi writer and Jamia Millia Islamia teacher Ajay Navaria and Punjabi poet and writer Nirupama Dutt.
Akhtar, who was to address the next session, then took the stage and said: "All religious values should be based on justice and equality."
Ilaiah told later: "What he said was bad. He can be an atheist but the rest of world cannot be atheist."
"All (Bollywood) superstars are superstitious," he added.
Akhtar countered: "If you watch cinema, it tells you a lot about life. Indians worship films."
But Ilaiah, who teaches at the Maulana Azad National Urdu University in Hyderabad, told his argument was for retrieving Buddhism to change modern Indian society.
"Buddhism in ancient India was the first religion to institutionalise the concept of justice, the concept of 'dharma'," he said, as he signed copies of his book, "God as Political Philosopher: Buddha's Challenge to Brahminism".