However, opposition parties, the Congress and the INLD, stepped up their attack against the treasury benches for scrapping the project.
Haryana Chief Minister Manohar Lal Khattar, amid the din, defended his government's decision of shelving it in the House, saying it is a "pro-farmer" move.
He hit out at the opposition benches and accused them of "playing politics" over the issue.
Dissatisfied with Khattar's replies, Congress and INLD members walked out of the House after an over three-hour long discussion on the adjournment motion on the scheme.
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The opposition benches, while declaring the shelving of the project as "illegal", asked how the state government could denotify the land acquired for it when the President had not given assent to the changes in the law.
However, Khattar said that the required amendment in the relevant law for denotifying the land acquisition had been sent to the President for approval.
Turning the table on the previous dispensation, he claimed that the Congress-led government in 2008 had delayed the project by deciding not to acquire 1,200 acre of land for construction of minors in 2008.
The chief minister also blamed the scheme's revision in 2004 in which it was decided to construct unlined channels for the Kharif season.
"The scheme received a major setback in 2008, when the acquisition of land for constructing distributaries and minors were shelved due to resistance of land owners... the result was the minors could not be constructed and the intended purpose of irrigation could not be fulfilled," Khattar said.
Defending his government's decision, Khattar said already more than Rs 303 crore had been spent over the past 30 years on this scheme which has been declared "unfruitful" by the CAG.
"Any farmer who wants land back, shall have to pay to the government only the actual compensation received by him without any interest.
"The amount to be returned will be worked out by valuing land at the rate of Rs 8 lakh per acre," Khattar said.
The decision to scrap the project was taken after the government found that the scheme was "not feasible".
To a question from opposition benches, the chief minister said the recharging of water can be done by laying underground pipes.
The adjournment motion was moved by Chautala after the question hour and he sought from the Haryana government to reconsider its decision of scrapping the scheme.
Heated exchanges took place between the treasury and Congress members when the Speaker stopped opposition MLA Raghubir Kadiyan when he was speaking on the issue.
Chautala asserted that it was his party's right to speak first on the canal scheme as they moved the motion.
During the discussion, he claimed that the state was still facing shortage of 22 million acre feet of water for its requirements.
Chautala said that if farmers do not use canal water, they will be ruined.
Members of the INLD and treasury benches traded barbs after the opposition party took a potshot at the government for allegedly bringing "fake" farmers who were happy with the scrapping of project.
The INLD MLA also raised a question over the committee which recommended the state government for denotifying the land acquisition.
"You should immediately reconsider the decision of scrapping the Dadupur Nalvi canal project, otherwise you will have to face consequences," Chautala said.
Kadian criticised the Haryana government for scrapping the scheme and asked the treasury benches to cite a single project in which the acquired land was denotified.
Congress MLA from Palwal Karan Singh Dalal claimed that the denotification of land for the project was at variance with the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.
Former Haryana chief minister Bhupinder Singh Hooda described the move of government as "anti-farmer" and declared that Congress after coming to power in next assembly polls, would ensure completion of Dadupur Nalvi project.