The two actors exchanged "strong negative vibes" during a script-reading session together, according to Mumbai Mirror.
Bhatt confirmed that the stars have a difficult working relationship, but denied that it will affect the film.
"Yes, they are not overtly friendly with each other, but they have been cordial," he said. "We shall not let their personal differences come in the way of our film.
"But you are wrong when you say that Emraan has asked me to drop Hooda from the project. We are not dropping Hooda for sure."
Hooda replaced Vivek Oberoi and Sanjay Dutt in Bhatt's film about the illegal arms industry in India.
Hashmi will play a mole who helps a policeman (Hooda) looking to uncover suspect goings-on in the trade.
The tabloid claims that the difficulties started when Hashmi and Hooda appeared together in 2010's gangster thriller Once Upon a Time in Mumbai.
Hashmi recently described himself as second only to Salman Khan as a Bollywood box office draw.
In January, he praised the makers of Once Upon a Time in Mumbai for giving him his break.
Watch Emraan Hashmi and Randeep Hooda in Once Upon A Time in Mumbai below: