The simple fact is, this is an incident that may have Islam as its basis but it is not Islam. The same way the KKK used Christianity to burn African Americans on the cross and otherwise. It may have more to do with the local Mullah and authorities should have investigated who was the proponent of the move.
Moreover, there is no clause on where a person is to be buried anywhere in Islam. Graveyards have been around much before Islam and while families tend to be grouped together the same is irrelevant on religion. In WWII Hindus, Muslims, Sikhs all died in the same battlefields in and around Burma.. they all were buried together. Ashes to Ashes, Dust to Dust. We are all in the end, excellent compost.