The inquiry was ordered after protests in Vilgam village, two days after Shahid Bashir Mir was killed.
"A magisterial probe has been ordered into the killing of Shahid Bashir Mir," Deputy Commissioner, Kupwara, Khalid Jehangir said.
The Deputy Commissioner said Mir was not involved in any subversive activity.
Two days back, Army had said that a "militant" was killed in an encounter in Hongnikote in Haphruda forest area, 85 kms from here.
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Local people today staged protests, saying Mir was not a militant but a Degree College student who was missing since August 21 and a missing report had been lodged on August 22 in police station Vilgam.
"When we came to know about the body yesterday, we asked the police for information. They told us that Shahid Bashir Mir was not involved in any subversive or criminal activity. So, further action will take place on this basis only. We will investigate it and the inquiry will be fast-paced," the Deputy Commissioner said.
"I have ordered a magisterial probe and the report will be submitted within a week. Then what further action is to be taken, will be taken," he said.
This morning, about 400-500 people, including Mir's family members, assembled at the Tarathpora Chowk with his body and started protesting, a police official said.
"Reportedly, Mir was not mentally fit for the last one- two months," the official said.
He added that the protesters pelted stones at the security forces.
"The violent mob also set ablaze a vehicle of the Deputy Commissioner, Kupwara," the official said.