Dear friend,
Since you have covered almost the complete journey, why do you not submit your papers to DGCA. Let them reject your papers by giving you a reason in writing.
There is no restriction as per the Indian CAR that the license has to be issued to Indians only. The FATA is a Foreign "AIRCREW" temporary authorization, and just that. Air crew only, not foreigners.
There are many Indian Passport holders who are flying VT aircrafts with FATAs issued to them on the basis of their foreign licenses.
The DG may be an honourable man, but on this occassion it seems that he is misinformed.
Good luck!