Petitioner's counsel C B Pandey alleged that the scheme was "discriminatory" as choosing only a village in any district and leaving the rest was not permissible under the law.
The Lucknow bench of the High Court, comprising Justices Amreshwar Pratap Sahi and Mahendra Dayal, gave three weeks to the Central and state governments to respond to the petition filed by Lucknow-based Naitik Party.
A preliminary objection was raised on behalf of the UP government that a political party cannot file a PIL, hence it was liable to be dismissed.
Centre's counsel Alok Mathur, who had appeared in the court, has said that the court has given three weeks to file a reply in the case.