Delivering the 16th DP Kohli annual lecture, organised by CBI in memory of its founder Director, Jaitley said judiciary and CBI are two institutions which cannot afford to be imperfect.
The Finance Minister, also an eminent lawyer, said earlier the concept was investigation is a police function and courts don't interfere in investigation.
"Today courts supervise investigation. The question of courts supervising investigation puts the investigator on the defensive. He then follows the golden rule that if I give a report that the accused is prima facie not guilty, questions are going to be raised on me and therefore I must somehow make a case and if the accused has good luck then he gets a fair trial," he said.
Jaitley said the "overkill" started with imperfections in the system as the judiciary felt that may be in some instances cases are not being investigated properly.
The Minister said once the judiciary became the supervisor of the probe, the investigators were left with little options, his discretions got squeezed. And then what was to be a rare exception became a pattern.
"This process has actually hindered the whole process of economic decision-making," the Minister said, adding that his experience is bureaucrats are now "passing the parcel" rather than taking the decisions themselves.
"...Concerned departments are reluctant to even enter in honest compromises because five years and ten years later they may be hauled up because of these vague phrases in the 1988 PC Act, the golden rule that your investigators follow and this new institution raking the privy council dicta that investigations must also be supervised by the courts," he said.