Mr Namdhari was appointed by the earlier Bharatiya Janata Party (BJP) government and the now ruling Congress had not taken any steps to remove him.
"We did not want to disturb the status quo as the post had a tenure. But in light of the latest developments, the state government will move to do what is needed," Chief Minister Vijay Bahuguna said on Tuesday.
"The process for his removal has been initiated," Mr Bahuguna added.
Legal consultations are on and it is only a matter of time before the man is eased out, a senior official told IANS.
The official added that the government may not have a case against Mr Namdhari in strictly legal terms but his being present at the shootout crime scene has given the state government "enough reasons to axe him".
Mr Namdhari, a close friend of the slain Ponty Chaddha, has more than three dozen cases against him. These include murder, attempt to kill and dacoity, said a police official.
He and Ponty Chaddha shared business interests. The late liquor baron, sources say, patronised Mr Namdhari and was instrumental in his appointment as the chairman of the Minority Commission.
His personal security officer Sachin Tyagi is alleged to have sprayed Hardeep, Chaddha's younger brother, with bullets in retaliation to the fire he apparently opened on the liquor baron on Saturday.
In his statement to the Delhi Police, Mr Namdhari has stated that he drove along with Ponty Chaddha to his farm house in South Delhi's Chhattarpur area.
On arriving at the farm house, he reportedly told the police that Hardeep began shooting at them the moment they arrived and came at close quarters and shot Ponty Chaddha.
Mr Namdhari said he saved himself by slipping out of the rear door.
After the Chief Minister sought a detailed report on the matter, the Director General of Police (Uttarakhand) Satyavrat Bansal has asked the police to coordinate with Delhi Police on the developments.
The Chadha brothers were cremated on Sunday evening.