The party also claimed that organising the function was in clear violation of National Green Tribunal (NGT) orders.
Upadhyay strongly refuted the charges as "baseless" and added that the banquet in question is "completely legal".
The AAP said its MLAs representing various constituencies of South Delhi (Saurabh Bhardwaj, Somnath Bharti and Naresh Yadav) had received complaints from the residents that Upadhayay had organised a family function on November 21 at Jhankar Banquets and Tower Restaurant, which it claimed had no legal clearance to host this function.
"It has been brought to light that the National Green Tribunal (NGT) in its order dated 10th July 2015 had restrained M/s. Jhankar Banquets from holding marriages/ parties till further orders," it said in a statement.
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This order was served on Vice Chairman DDA, Chief Engineer South - DDA, Director Horticulture - DDA- South, Chief Fire Officer - Delhi Fire Services and Municipal Commissioner SDMC, the party claimed.
Bharti also tried to raise the issue in the Delhi Legislative Assembly, but was denied by Speaker Ramniwas Goel.
"The banquet is running for 17 years and there was some dispute with local residents after which it was sealed. But later it was opened after an order by the SC," he said.