A division bench headed by Justice R V More directed the government to submit a report on the steps taken to start a police probe by February 6.
The judges refused to accept government's submission that it could not initiate probe by police as all the documents pertaining to the case were with the judicial committee set up earlier to look into the matter.
The court said the government could have asked the committee for copies of the documents.
"This is the last chance the court is granting you. Get the papers or do whatever else it takes to initiate probe and inform us of the steps taken by the next date," it said.
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The court was hearing a plea filed by Pune-based activist Hemant Gavande, alleging, among other things, that Khadse purchased a three-acre plot in an industrial zone at Bhosri near Pune in the name of his kin for Rs 3.75 crore against the market price of Rs 40 crore, misusing his position as the state revenue minister.
Khadse, who was number 2 in Maharashtra cabinet, stepped down last June in the wake of allegations.
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