The politically-fraught decision came within three weeks after a special court sentenced 11 accused to life imprisonment, three of them local CPI(M) functionaries.
The decision to refer the case to CBI was based on the recommendation of the Special Investigation Team that inquired into the petition of the slain leader's wife, alleging senior CPI-M leaders were involved in the conspiracy leading to the brutal murder of her husband.
He said the SIT report had stated that the accused had travelled to neighbouring states like Goa, Maharashtra and Karnataka after committing the crime and were suspected to have received help from CPI-M leaders while hiding.
Chandrasekharan's wife K K Rema had earlier this month gone on a fast for five days in front of the government secretariat here to press the demand. She called it off after getting a firm assurance from the government that her demand would be considered.
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Reacting strongly to the development, CPI(M) state secretary Pinarayi Vijayan said it "is an illegal decision and involved misuse of power."
"Ordering further inquiry in a case in which the court had already given the verdict is illegal and a challenge to the rule of law. This will boomerang on UDF," he told reporters at Perinthalmanna in Malappuram district.
Vijayan, now leading his party's Kerala March campaign, accused UDF government of "witchunting CPIM) based on a script drawn up in advance."
When his reaction was sought, Achuthanandan said "you need not draw me into a decision taken by the government based on the commitment it made to Rema.