Following intervention by district childline authorities after some parents and students complained to them, the school has withdrawn the move, authorities said.
The action by the Al Farooque English Medium school at Pandikkad in the district triggered widespread outrage among students and their parents as they felt it was discriminatory and insulting.
A section of them approached the district childline authorities with written complaints following which a team visited the school which is affiliated to the Central Board of Secondary Education.
"Two sets of uniforms were introduced by the school in June this year and a section of the students and parents who felt insulted by the move which discriminated among them, approached us with written complaints," said Anwar Karaikkadan, convener of the Malappuram district childline committee.
"Following this, we made a visit to the school in June to inquire about the matter," he said.
Denying that the students were segragated on the basis of their academic performance, the school authorities replied that a special group was formed among the students only to motivate them, Mr Anwar said.
"Last week, we moved the District Child Welfare Committee seeking action against the school for causing mental agony among its students by its action," he said, adding, "yesterday I was informed by the school authorities that they had withdrawn their move".
Meanwhile, the Kerala State Commission for Protection of Child Rights has registered a case and sought a report on the matter from the school principal as well as the deputy director of education within two weeks.
The school authorities were not immediately available for comment.