Additional Solicitor General Indira Jaising told a bench comprising Chief Justice P Sathasivam and Justice Ranjana Prakash Desai that details of the violation have been documented in the affidavit filed by the Centre.
The ASG said the money which is released from the central fund was not reaching the workers and there were irregularities on the construction aspect.
She said it was for the state government to take a call on the issue of the CBI probe as the Centre on its own cannot direct investigation by the agency.
The state government said it did not have a copy of the Centre's affidavit and needed time to respond to the irregularities mentioned in its affidavit.
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The bench asked the state government to respond to the affidavit within six weeks.
Earlier last year, the court had directed the Centre and the Uttar Pradesh government to produce relevant records before it.
"The records so produced shall contain reports that have been submitted by the National Level Monitoring Committee to the ministry concerned," the court had said.
The bench had first taken the allegation of irregularities in Odisha and later the NGO had filed an application claiming that despite receiving investigation reports and intimations from the Rural Development Ministry about the lapses, there is an "apparent indifference on the part of the state government of UP".
"After receipt of a large number of complaints, the central government had reached a conclusion that the CBI investigation is necessary in the case of implementation of the MNREGA in the state of Uttar Pradesh," the NGO said.