The rejection came following complaints that Natarajan had failed to disclose details of a case against her in her nomination papers.
The development has dramatically altered the political landscape ahead of the Rajya Sabha contest.
Congress MLAs called back, flight recalled
The setback unfolded as the Congress was busy safeguarding its legislators from alleged BJP poaching attempts.
Party MLAs had reportedly been assembled for a flight to Bengaluru as part of the strategy.
However, following the rejection of Natarajan's nomination, the plan was abruptly scrapped. As per reports, said the flight carrying the MLAs was recalled from the runway, and the legislators were asked to return.
Last-ditch attempt at Election Commission fails
The Congress also mounted a late effort to challenge the Returning Officer's decision.
A delegation led by senior Congress leader K. C. Venugopal reached the Election Commission office in Delhi.
According to NDTV's sources, the move failed to gain traction as most officials had left the office after 6 pm. While Chief Election Commissioner Gyanesh Kumar was present, Congress leaders had not sought a formal appointment with him.
Natarajan alleges BJP conspiracy
Addressing a press conference later in the evening, Natarajan alleged that the BJP was attempting to manipulate the Rajya Sabha election.
"It all began when the ruling BJP fielded a third candidate despite lacking the requisite numerical strength. It became evident that they were engaging in politics designed to trample upon the Constitution and democracy," she said.
She further alleged that the ruling party was trying to engineer the election outcome through political manoeuvring.
'This is about democracy and the idea of India'
Escalating her attack, Natarajan linked the controversy to what she described as a larger battle for democratic values.
"They are clearly attempting to manipulate the Rajya Sabha election just as they previously subverted elections in Madhya Pradesh," she said.
"This is not merely about a Rajya Sabha seat or a specific candidate; it is about the broader struggle for the 'Idea of India' and democracy that our leader, Rahul Gandhi, is waging a critical battle for our nation today," she added.
The BJP has not yet responded to the allegations. The rejection of the Congress candidate's nomination is expected to have a major impact on the outcome of the Rajya Sabha election in Madhya Pradesh.