Justices K K Sasidharan and G R Swaminathan of the bench here observed that the government order appointing him DGP and giving him two years extension was made "correctly", while disposing of a PIL seeking to quash the decision over corruption allegations against him.
The bench said records seized from the gutkha manufacturing company were not sufficient to deny appointment to Rajendran and the state was "correct in the decision of selecting and appointing him as DGP".
The judges said their observation would not stand in the way of the DVAC conducting the inquiry independently and taking appropriate action in accordance with law.
"The inquiry/investigation must be personally monitored by the Director of DVAC himself and also an independent Vigilance Commissioner, a professional, should should be appointed within two weeks from today," the justices said.
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The court directed the Director of DVAC to scrupulously follow the Vigilance Manual while conducting the inquiry and comply with the time schedule.
Petitioner K Kathiresan, the Madurai district secretary of the All India Trade Union Congress, challenged the appointment of Rajendran and sought CBI investigation into the bribery allegations against him under direct monitoring by the court.
He had contended that documents seized by the IT Department "revealed" that Rajendran had taken a bribe from the gutkha company to facilitate sale of the banned substance.
Rajendran, holding additional charge as DGP (Law and Order), was due to retire on June 30 but the government appointed him to the top post for two years from July 1.