The Khattar government had failed to perform its "raj dharma" and people have lost faith, so it must step down, Hooda alleged.
The Congress leader claimed that the Dera Sacha Sauda episode was the third major issue that had been mishandled by the Khattar government.
The previous two incidents he said were the self-styled godman Rampal issue, in which the latter's armed followers clashed with police leaving six dead in Hisar in November 2014 and the violence which broke out during Jat reservation stir that left 30 dead.
While 32 people died in Panchkula in the violence that broke out after the Dera Sacha Sauda chief was convicted by a CBI court in Panchkula on Friday, six people died in violence in Sirsa, where the sect headquarters are located.
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However, the state has been peaceful after the sentencing of the Dera chief in the rape case.
"When there were intelligence inputs, why did the government fail to act and how did the government allow such a large build up of people in Panchkula, which resulted in loss of lives and damage to property and even media crews were attacked," Hooda said addressing a news conference here.
"The government failed to perform its "raj dharma", otherwise the situation could have been avoided.
After the sentence was pronounced, the situation was handled, my question is why it could not have been handled in the same way on Friday, he asked.
"This government created this situation thinking it will help its votebank. Now, people of Haryana have lost faith in them. The courts have rapped them. In a democratic set up, when people give up their faith in the government, it should step down on its own on moral grounds," he said.
On the government saying that a "clerical mistake" in issuing prohibitory orders under Section 144 CrPC led to the huge gathering of Dera followers in Panchkula, Hooda said, "anybody who has even little knowledge of law will not buy this argument".
This is a lame excuse and for this they suspended DCP Panchkula (Ashok Kumar) making him a scapegoat, he said.
"It is political procrastination and lack of foresight on the part of the government that they failed to anticipate the scale of trouble, putting common people to grave inconvenience in Haryana and Punjab," he said.
Hooda said during his time also situations threatening peace and public order in the state including on Rampal, Dera and Jat reservation front arose, but the Congress government did not allow peace to be threatened.
Asked should Dera Sacha Sauda be banned, Hooda said he will not like to comment since the matter is sub-judice.
Asked to comment on the sentencing of the Dera chief in a rape case, Hooda said, "I don't comment on judicial pronouncements".
To another question on Dera chief wielding clout as politicians from many parties used to visit his Dera, Hooda said, "when I was the chief minister for 10 years, I never visited the Dera even once".
Hooda, who visited Panchkula today, said there is anger among local residents.
Asked that it is being said that from those killed in Panchkula violence, no one was a local resident, Hooda said, "they (those killed) were humans and citizens of this country. This is most absurd statement".