Babu's return to the cabinet was imminent after the High Court stayed the vigilance court order and ruling Congress-led UDF decided there was no need for him to resign.
Babu, who resigned on January 23, represents Tripunithura assembly segment in Ernakulam and is a first time minister and close confidant of Chandy.
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His resignation came two months after the resignation of Kerala Congress (M) supremo K M Mani as Finance Minister following Kerala High Court's strong observations against him in the bar scam.
The resignations had rattled the UDF government in poll- bound Kerala.
Working President of Kerala Bar Owners Association Biju Ramesh had alleged Babu was given Rs 10 crore as bribe for renewal of licences of liquor bars, a charge rubbished by the Congress leader.