A Labor brawl in Melbourne's western suburbs has escalated with suspended local councillor Intaj Khan moving to sue federal MP Joanne Ryan for defamation after her failed attempt to have him expelled from the party.

As revealed by the ABC last month, Ms Ryan who holds the safe seat of Lalor, moved that Mr Khan, a Wyndham councillor, be expelled from Labor after he was charged for failing to disclose property and business interests.

The property charges have since been dropped and the case is yet to go before the courts.

Ms Ryan's pleas to Premier Daniel Andrews and the Labor Party executive to have Cr Khan removed from the party failed.

His legal action came as the Wyndham council moved on Tuesday night to suspend Cr Khan from his position for a month.

"Wyndham City Council voted to impose sanctions against Cr Intaj Khan for breaches to the Wyndham Councillor Code of Conduct as a result of comments Cr Khan made online and within the media in early June 2017," the council said in a statement.

"Council has resolved that Cr Khan be removed from any position where he represents council ... for a period of four weeks and that Cr Khan make a public apology for his conduct at the next Ordinary Meeting of Council that he attends in his capacity as a councillor."

Cr Khan said he was suspended for a Facebook post criticising council in June. But he would not comment further.

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The infighting has been triggered by a preselection for the safe seat of Tarneit, being vacated by disgraced speaker Telmo Languiller.

Cr Khan has nominated, while Ms Ryan, who replaced Julia Gillard in the seat of Lalor and hails from the former senator Stephen Conroy-linked sub-faction of the right, is backing Jasvinder Sidhu.

The group centred around former state minister Adem Somyurek is supporting Sarah Connolly in the battle for the seat, which Labor holds by 14.6 per cent.

The preselection fight will be a test of the major power blocs within the Labor Party.

Comments damaged Khan's 'good reputation': lawyer

Cr Khan has been dubbed the "King of Bling" — a term he vehemently rejects.

Joanne Ryan is supporting Jasvinder Sidhu in the pre-selection race. ( AAP: Julian Smith )

His lawyers wrote to Ms Ryan outlining how she defamed their client by saying Cr Khan had given the Labor Party a bad name.

"Clearly, you have openly accused Cr Khan of wrongfully using his position as a councillor for a wrongful, illegal and substantial personal gain," lawyer Nick Galatas wrote.

He said the comments are defamatory and "gravely injurious" to Cr Khan's "good character, public standing and good reputation" as well as damaging his business interests.

"While Cr Khan reserves the right to seek that you compensate him for his loss and damage arising from your false, misleading and defamatory allegations, we that advise that your formal and public retraction of your remarks and unreserved apology to Cr Khan may mitigate the loss and damage he has suffered and continues to suffer."