An anonymous letter was written by these students which was forwarded to IIT Madras last week.
The HRD Ministry has termed the allegations "unfortunate" and that IITs were never used for such purposes", the copy of the letter forwarded to the institute for comments said.
Sources said the ministry's view may have weighed heavily on the mind of IIT Madras' administration while derecognising the group.
Making a scathing attack, the letter alleged the group is distributing controversial posters and pamphlets in the campus. The group it said is trying to "de-align the SC and ST students".
"They are also trying to create hatred against the prime minister and the Hindus," the letter said, adding "We believe this group is politically motivated and is getting funds and encouragement from some outside organisation."
The letter also alleges that some higher authority people are also supporting them.
"They (the group) are using IIT Madras as a stage as a publicity."