This was the second time a minister stepped down from the 10-month-old LDF government. Five months ago EP Jayarajan, who held the industries portfolio, had resigned following allegations of impropriety.
Mr Saseendran, a member of LDF ally Nationalist Congress Party, said he had not behaved improperly with anyone and his resignation should not be seen as an acceptance of guilt.
"My resignation is to uphold political morality," Mr Saseendran told reporters, adding that Chief Minister Pinarayi Vijayan had not asked for his resignation.
Chief Minister Pinarayi Vijayan -- who is leading the coalition of 11 parties -- said he viewed the allegations "seriously" and a decision will be taken after "examining all facts".
This is the second blow to the CPI(M)-led LDF government in Kerala after the resignation of Mr Jayarajan over allegations of nepotism in October. He had allegedly appointed two of his close relatives to top posts in Public Sector Units.
Ramesh Chennithala, the leader of Opposition in the assembly, said the Chief Minister should conduct a probe and if the minister is guilty, he should be asked to resign. "The truth needs to come out. The report has shocked everyone," Mr Chennithala told reporters in Thiruvananthapuram.
Mr Saseendran is one of NCP's two legislators in the state and represents the Elathur constituency.