They could have fought harder (say, waiting for any actual judicial proceeding at all, rather than just acting on the complaint); but it is hard to blame the publisher for failing to win when there’s a ‘no doing anything that makes somebody butthurt about religion’ law on the books.
Such laws (while almost always selectively enforced against minorities, so there probably are plenty of religions that Penguin could publish about in India without a peep), don’t leave you much room to maneuver once somebody has decided to stifle you. (Which is why they are so invidious, even when couched in the language of encouraging civility and harmony and whatnot, they are in practice a veto, not an assurance of politeness).
If I were Penguin, I’d be inclined to issue a ‘You change your stupid law, and we’ll run a special addition in your honor. Until then, try importing from a free country.’ statement and leave it at that.
(on the other hand, this is probably why I’m not the public face of any organizations…)