The fans of both clubs, at City and Villa, are riled up even as Birmingham wait for a formal approach for the manager who quit while on holiday.
McLeish facing a Birmingham backlash for move to Villa
Birmingham are still waiting to receive an official approach from city rivals Villa to speak to McLeish - before they can start discussing a compensation package.
McLeish resigned as Birmingham manager on Sunday and the Scot is favourite to replace Gerard Houllier at Villa.
It is understood City will be seeking £5.4 million (Dh28.6m) due in compensation for the remaining two years of McLeish's contract at the time he quit.
Pannu told Sky Sports: "The matter concerning Alex McLeish is with the Birmingham City lawyers. They are dealing with it.
"I am here trying to protect the interests of the club and, in doing so, I'm adhering to the terms of the contract that was agreed between the manager, his legal advisers and the club.
"I have nothing against Alex McLeish. If he moves to another place, he will go with my blessing. But it will be done properly as per the contract."
McLeish, who is on holiday in Corsica, is considering a case of constructive dismissal. His relationship with Carson Yeung, the Birmingham owner, became increasingly strained last season.
Such action by McLeish could take time, as was the case when Martin O'Neill left Villa last August as he did not settle the matter for nine months.
Certain sections of Villa fans continue to make it clear they do not want McLeish as manager.
Jonathan Fear, the editor of the Vital Villa fans' website, said: "I would fear for the atmosphere and attendances at Villa Park if Alex McLeish is appointed manager.
"I've got friends who are adamant they will return their season tickets if McLeish is appointed.
"It is not just because he was Birmingham manager but because of his style of play.
"Even some Blues fans have said to me they didn't want to watch that type of football anymore."
There has been speculation regarding McLeish's safety should he eventually move to Villa.
But Kevin Ball, the editor of Birmingham fans' website Joys and Sorrows, said: "It is more likely he will be on the receiving end of gallows humour more than anything else. I just think McLeish will be mad if he takes on the Villa job.
"He won't have the patience and support he got at Blues.