The clamour for the government's resignation, which forced adjournments in both houses of parliament, saw the Left parties, the main opposition Bharatiya Janata Party (BJP) and the Samajwadi Party amongst others unite.
The government responded by saying it could not comment as the cables between the US government and its missions abroad were inaccessible for the government of India.
US diplomatic cables leaked on WikiLeaks and published by The Hindu newspaper purportedly say that that payoffs had been made to MPs to ensure majority for the Congress-led government in the confidence vote over the India-US nuclear deal.
Nachiketa Kapur, a political aide of Congress leader Satish Sharma, is quoted as saying that a fund of Rs.50 crore had been formed to pay MPs. He also apparently showed two chests containing cash meant for the pay-offs.
"Sharma's political aide mentioned to an embassy staff member in an aside on July 16 that Ajit Singh's (Rashtriya Lok Dal) RLD had been paid Rs.10 crore (about $2.5 million) for each of their four MPs to support the government.
"Kapur showed the embassy employee two chests containing cash and said that around Rs.50-60 crore (about $25 million) was lying around the house for use as pay-offs," according to the leaked cable.
Leader of Opposition in the Lok Sabha Sushma Swaraj said the issue had "shamed Indian democracy". She mocked the government saying "all this has taken place right under the nose of a so-called honest prime minister".
This has come to light now, she said, recalling that three BJP MPs had brought cash to the house in 2008 during the trust vote. But then speaker Somnath Chatterjee had ordered an inquiry against them instead of taking cognisance of the matter who was distributing the wads of cash, she added.
She said: "An official of the US embassy was shown a chest full of cash. Is this a display of the bullying tactics of the government or its shamelessness?
"This government has lost the moral authority and the right to continue and the prime minister should resign immediately."
Samjawadi Party's Mulayam Singh Yadav, who had voted in favour of the UPA government in 2008, said: "I had also played a role in saving the government. This defames even me.
"If all are painted with the same brush, we will also lose face. Only a discussion on this matter can clear our name."
Communist Party of India (CPI) leader Gurudas Dasgupta added: "Never in the history of Indian democracy has such a news report appeared in newspapers. Money was paid to members. This is the murder of democracy.
"If the prime minister does not deny this he should resign immediately," the Left MP said amid the uproar in the house.
It was no different in the Rajya Sabha with BJP's Arun Jaitley stating that the "government survived on the basis of a political sin" and had no authority.
Faced with the barrage of criticism, the government said it could neither confirm nor deny the alleged revelations.
Finance Minister Pranab Mukherjee said in a statement in the Rajya Sabha: "There is a diplomatic immunity to what a sovereign nation discusses with its mission abroad, no access can be made to them, government cannot confirm or deny it.
"Every Lok Sabha is sovereign in its period; whatever happened in 14th Lok Sabha, cannot be dragged in 15th Lok Sabha. The 14th Lok Sabha has been dissolved," he said.
Mukherjee also said the revelations were not admissible evidence in any court of law.
"Diplomatic immunity may be available to US diplomats, it can certainly not be claimed by government of India for a crime committed by Indians in India," the BJP leader responded.
"That correspondence despite the immunity has already been published," he said.