The Lucknow bench also directed the secretary Nagar Vikas to file his reply in this regard and fixed August 19 as the next date of hearing.
A division bench of chief justice DY Chandrachud and justice Shree Narain Shukla passed the order on Friday on a public interest litigation.
The PIL has sought directions for disqualifying Khan from assembly and restraining him from holding the office of Cabinet Minister.
Jain had alleged that Azam, being an MLA and Cabinet Minister, can't be appointed as Chairman of UP Jal Nigam as it would amount to holding 'dual office of profit'.
The state government rejected the allegation, saying that Azam is not getting any renumeration or profit as Chairman of UP Jal Nigam. Hence, this does not come under 'holding dual office of profit'.