Social media was abuzz with the issue of Modi signing on the tricolour which Khanna said he will hand over to Obama.
Khanna had prepared the menu for the Prime Minister's dinner with Fortune 500 CEOs last night.
The chef also displayed the signed tricolour to the media.
However, the flag was later reportedly taken away by officials after the controversy erupted to check whether there was any violation of the flag code.
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The reactions in the virtual world came thick and fast as the controversy continued to rage.
Asked whether the Prime Minister's action of signing on a national flag was an offence under IPC, Congress Party's chief spokesman Randeep Surjewala said in New Delhi, "we are not petty like BJP. We respect the office of the Prime Minister".
At the same time, he said that the Prime Minister must look within and take corrective action as respect for the national flag is the responsibility of 125 crore people, more so for the Prime Minister.
Congress leader Manish Tewari tweeted, "Has PM read Para 2.1 sub para 6& Para 3.28 of Flag Code 2002 that states lettering on National Flag is misuse.3 yrs jail under PINH Act 2003."
Prime Minister told the chef that he had done him proud by preparing an elaborate menu for his guests -- over 50 top American CEOs who met him at the Waldorf Astoria hotel here.