Justice Christopher Beale ordered the woman to remove the garment, which covers much of a woman's face except her eyes, or remain outside.
"I require anybody who comes into the court - and all are welcome - but anybody who comes into the court, for their face to be uncovered," Justice Beale said.
According to the transcript of proceedings, the lawyer for the wife's husband said she was "obviously not prepared to do that".
Justice Beale incorrectly referred to her clothing as a burqa which covers the entire face.
The Victorian Liberals have proposed fining or jailing women who refuse to remove their niqab or burqa in courtrooms, with Opposition Leader Matthew Guy describing it as "disrespectful".
The Labor State Government has rejected the policy.
Removing the niqab can be 'traumatic'
Vice-President of the Islamic Council of Victoria, Adel Salman, said Justice Beale's decision was unreasonable and a breach of her human rights, particularly as she was not giving evidence.
“I understand the judge is completely acting within his powers, however, in this case I just think it’s unreasonable and I think the woman had a right to be in the courtroom to show support for her husband.”
Islamic Council of Victoria Vice-President Adel Salman says the niqab ban is unreasonable. Source: SBS World News
He said women who choose to wear the niqab take it very seriously.
“It’s not a light-hearted matter, it’s not trivial. They do it through devotion, through being faithful to God and it’s part of her identity.
“To ask her to remove the niqab is almost like asking her to set aside part of her identity and of course that can be challenging, if not traumatic for people.”
If there were concerns about a person’s identity, Mr Salman suggested a woman wearing a niqab or burqa could be asked to step into a private room and show her face to a female security member for verification.
