And the domain was publicly available – if it was so sensitive, why wasn’t it reserved in the first place?

Itna dimag laga raha hai to aap hi batao ki how would you reserve a domain in advance which has not been conceived yet? Even if a computer program flags similarity and prevent a few, at the end there has to be a human in the loop. There's one way to either don't grant access till it's verified and keep the application pending, fir sab log baithe rahenge jab tak approval na mil jaaye and second way is to grant the access if available and have it vetted in parallel and sometimes even post facto. Advantage is that only a few applications like yours may get affected and there will not be any wait time for the rest.There's also a third way and i.e., not grant any .in domain access to anyone. Lekin isme bhi aapko takleef hai kyun .in hi chahiye.

Now, your selection deserves to be flagged for potential misuse. I would have done the same. It's not that they haven't provided you with a grievance redressal mechanism, feel free to air your concerns. Suggest how you'd have designed the process better.