Saturday's fire destroyed a community hall, where schoolchildren were putting on an end-of-term event for a crowd of about 1,000, including their parents.
Authorities said 538 people were confirmed killed, but the toll could rise to 600. Some 250 people were injured.
Residents were outraged by the scant facilities at the Civil Hospital in Dabwali, the only government-run hospital in the town 125 miles (200kms) north-east of New Delhi. Doctors had to redirect hundreds of injured people to hospitals in neighbouring towns.
"Is this a way to run a hospital?" asked Suresh Singh, a protester. Mr Singh said the hospital had only 10 beds for a population of 50,000. The hospital refused to comment.
The blaze had spread swiftly through the plywood building. Many were killed by the stampede towards the only working exit. The other exit was locked.
Police were investigating Kewal Kishan Dhamija, the hall's owner, on suspicion of criminal negligence. Mr Dhamija acknowledged the hall was built without proper permits, the Statesman newspaper reported yesterday.
Police said shoddy wiring at the hall may have caused the fire. They were checking the electrical wiring.
About 5,000 protesters blocked the removal of 18 bodies from the hospital. The demonstrators said they were angered by a reported remark by a state minister that such disasters were common in India. Jagdish Nehra, the minister, later denied he made the remark.