A bench of Chief Justice Dipak Misra, Justice A.M. Khanwilkar and Justice D.Y. Chandrachud granted bail as it was told that Bhandari was in jail for last seven months.
The plea for bail was opposed by Aishwarya Bhati appearing for Uttar Pradesh.
Bhandari was booked for criminal conspiracy and criminal breach of trust under sections of the Indian Penal Code.
Around 30 children died at the state-run Baba Raghav Das Medical College and Hospital in Gorakhpur on August 10 and 11, 2017, reportedly due to shortage of liquid oxygen.