"We are not satisfied with the report...It seems there is non-application of mind by the agency in respect of issues raised in the petition," said a bench headed by Justice Abhay Oka after reading the report, submitted in a sealed cover.
The judges directed the agency to file an additional report by September 28, and asked the Joint Director of CBI, Western Zone to remain present on the next occasion.
Wategaonkar has sought disclosure of names of two top officers of the Maharashtra government who had dealt with Adarsh files and allegedly obtained benami flats.
He has claimed that CBI, when it arrested one of the promoters of Adarsh society, Kanhaiyalal Gidwani in 2011, it "claimed in the remand papers that they needed Gidwani's custody because he held benami flats for political leaders".
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The 31-storey building was originally meant for Kargil
war widows, but many of the flats were allotted illegally to bureaucrats and politicians. The building also allegedly violated coastal regulation zone (CRZ) norms and civic rules.
On April 29, the high court had ordered demolition of the building and sought criminal proceedings against the politicians and bureaucrats for "misuse" of power, holding that the high-rise was illegally constructed.