A division bench of justices V M Kanade and P R Bora was hearing a petition filed by Vivekanand Gupta, who claimed serious irregularities by BMC in construction of roads between 2013 and 2016.
Gupta claimed the irregularities are to the tune of Rs 353 crore.
"You (government) cannot remain a mute spectator. You have powers over the civic body," the court said.
The bench directed the government to file a report asking if it extends any funding to the civic body and if it has any monitoring mechanism to check how much money is spent.
The court asked the state police's special investigation team and the city police's economic offences wing (which are already probing the scam) to expedite their investigation.
The court was today informed that till date 24 people have been arrested in the case.