A notification by Maharashtra's Law and Judiciary Department said "it had withdrawn its order appointing Nikam as special public prosecutor, on his request, in the case pending before a Pune court". 28-year-old Sheikh, a software engineer, was attacked and killed on June 2, 2014 allegedly by HRS members in Hadapsar area.
Mr Nikam, who was the prosecutor in 26/11 Mumbai terror attack case, refused to comment. He had also handled the 1993 Mumbai serial blasts case and last year examined Pakistani-American LeT operative David Headley in the 26/11 Mumbai terror attack case.
The All India Majlis-e-Ittehadul Muslimeen (AIMIM) expressed shock over Mr Nikam's move. "Advocate Nikam has never done this before in any case, so what happened in this case that he sought to withdraw his appointment?" asked AIMIM local leader Anjum Inamdar.
He also asked Mr Nikam what prompted him to withdraw from the case. Mr Sheikh's father Sadique Shaikh requested Mr Nikam to reconsider his decision.
"Mr Nikam's acceptance to their request was the first sign of justice. There could be various reasons for the delay in trial but we do not blame him for that. We request him to reconsider," he said.
Around 20 people, including HRS chief Dhananjay Desai, were arrested in connection with the case. Mr Desai had been charged for criminal conspiracy.
The Bombay High Court granted bail to three accused -- Vijay Gambhire, Ganesh Yadav and Ajay Lalge -- on January 17 while observing that the trio seemed provoked in the name of religion.
Police suspected that the incident was a fallout of violent protests in Pune over derogatory pictures of Maratha warrior king Chhatrapati Shivaji and the late Shiv Sena chief Bal Thackeray on a social networking site.