Several other separatist activists, including People's Democratic Freedom Party chief Sayid Shabir Ahmad Shah, who had joined Malik in his anti-election campaign, were detained.
Some of them were also injured in Thursday's police action.
Witnesses said police were trying to foil attempts by several hundred activists belonging to Malik's Jammu Kashmir Liberation Front (JKLF) and other separatist parties to enter Anantnag - the second major city of Indian-administered Kashmir - to campaign against the holding of civic elections in the state after a gap of 27 years.
A number of Kashmiri separatist groups are opposing the civic polls, arguing that such elections, or any other such exercise, cannot be a substitute for the demand for the right to self-determination.
In the third phase of Kashmir's municipal elections, polling will be held in twin districts of Anantnag and Pulwama on Sunday.
In the first two phases polling was held in two seasonal capitals - Srinagar and Jammu - and the frontier districts of Kupwara and Anantnag.
So far voter turnout has been high in all the places except in Srinagar, considered a stronghold of the separatist movement.
Civic polls in Kashmir are being
held after a gap of 27 years
Thursday's scuffle took place when the police came in the way of anti-poll campaigners at Khanabal, a few kilometres short of Anantnag.
When the agitators resisted, the police responded by attacking them with bamboo sticks and rifle-butts, witnesses said.
The policemen also fired over the heads of the protesters and damaged several vehicles in which they were travelling to Anantnag, about 55km south of Kashmir's summer capital Srinagar.
An injured Malik was admitted to a nearby police hospital, but when his condition deteriorated he was shifted to Srinagar's Sher-i-Kashmir Institute of Medical Sciences for specialised treatment, reports said.
Bid on life alleged
The police and the hospital authorities have not commented on the nature of the injuries reportedly suffered by Malik.
Kashmir police face almost daily
attacks by armed Islamic rebels
JKLF has termed the police action as an attempt to kill its leader and others.
For his part, Kashmir's hardline separatist leader Sayid Ali Shah Jilani said in a statement from New Delhi that the incident exposed the insincerity of Kashmir Chief Minister Mufti Muhammad Sayyid's pledge to administer a healing touch and engage in a battle of ideas.
A statement issued by the police in Srinagar accused Malik and his associates of assaulting the police party on duty after it stopped the vehicles they were travelling in.
Malik and his associates left for Srinagar thereafter, the Kashmir police statement added.