The film, 'D-Company', an action thriller released during the Onam festival season last month, is directed by M Padmakumar, Vinod Vijayan and Diphan.
The theme of the film, however, has nothing to do with Dawood's life.
According to police, the case has been taken up on instructions from City Police Commissioner P Vijayan under the Young Persons (harmful publications) Act 1956.
The charge is that the posters displayed picture of Dawood Ibrahim, wanted by the law enforcers in the country.
Meanwhile, a poster of an upcoming movie, "Idukki Gold" has incurred the wrath of pro-Hindu outfits for allegedly depicting Lord Shiva as smoking ganja with Latin American revolutionary icon Che Guevara.
A pro-RSS outfit, 'Hindu Aykyavedi', has lodged a complaint with police against it, sources said.