Considering separate pleas related to the scam, two benches of the High Court expressed dissatisfaction at the probe and sought to know from the prosecutor if the government was trying for some sort of a cover-up.
Considering the bail plea of scam accused and tele actress Shalu Menon, justice S S Satheeshchandran found fault with the way the police had been handling the case and said the Court would not hesitate to summon ADGP A Hemachandran, who heads the Special Investigation Team (SIT).
Another judge V K Mohan, while considering a scam-related plea by businessman M K Kuruvila, sought to know from the prosecutor if an inquiry was not required to find out whether the Chief Minister was aware of the cheating.
Seizing on the issue, Opposition Leader V S Achuthanandan asked Chandy to step down without waiting for a moment.
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Countering the opposition, Chandy said though he respected the court's observations, he would not act on the basis of the way the media had interpreted them.
The LDF, which has been campaigning for Chandy's resignation and judicial probe into the scam for over a month, decided to step up their agitation in view of the development.
CPI(M) state secretary Pinaryi Vijayan said the court's observations were "very serious" and Chandy should not remain in office for a single moment if he was left with a modicum of respect for legal processes.