Prime minister Vajpayee was "disturbed" and wrote down his resignation letter in his Parliamentary office. "Parliament was in session," Singh said on NDTV's Walk the Talk programme.
"He (Vajpayee) pulled a piece of paper and he started writing his resignation by hand. I held his hand and he looked at me severely and I said what are you doing. Don't do this. He said Chod do and I somehow I persuaded him. We went to his house. We were able to defuse the situation," Singh said.
Singh said he alongwith Vajpayee, Advani and Arun Shourie were flying to Goa for a BJP meeting when the conversation relating to the Gujarat chief minister cropped up.
"He (Vajpayee) asked, Gujarat ka kya karna hai (what should be done about Gujarat ?...there was silence for sometime. He then said Gujarat ke bare mein sochna chahiye. Then Advaniji went towards the bathroom...Atalji said poochhiye fir ky karna hai (ask him then what should be done)?
"I went and asked Advaniji. Advaniji just said one phrase-bawaal khada ho jayega party mein (there will be uproar in the party," Singh said.
Singh, who held the key portfolios of Finance and External Affairs in the Vajpayee government, said on that day, he was called from the House by Pramod Mahajan to the PM's office in Parliament.
"Come quickly Jaswantji", he told me. "I didn't know what had happened... When I went, I was told "Sambhaliye, sambhaliye (control the situation). Istifa de rahein hain (he is giving his resignation).
Vajpayee called his secretary. "I told his secretary to go away and not come back. He (Vajpayee) sternly asked me kya kar rahe ho (what are you doing)".
Asked whether Vajpayee was inclined to act against Modi, Singh said, "Factually to the best of my recollection, yes, this was the conversation.
Pressed further on whether Vajpayee was inclined to sack Modi, Singh said, "I would not use the word 'sack'. But certainly from the party to reflect and take some corrective measure.
Singh had sought to embarrass Advani yesterday by saying that the then home minister was well aware of his accompanying three terrorists to resolve the Kandahar hijack episode.
Advani had then claimed that he was against the decision to free terrorists in return of the passengers of the hijacked flight IC-814 in 1999 and went on say that he had nothing to do with the decision to send Singh with the terrorists.