Judge B H Loya refused bail to Rehman Khan who was a police inspector at the time of encounter of Sheikh.
As per the original FIR registered by Khan, there was an exchange of fire between the police and Sheikh.
According to CBI, which claims that Khan had fired two rounds at Sheikh, the encounter was fake.
The court had earlier rejected the bail application of Gujarat police inspector N H Dhabi too.
According to CBI, gangster Sohrabuddin, who allegedly had links with Pakistan-based terror group Lashkar-e-Taiba, and his wife Kauser Bi were abducted by Gujarat's Anti-Terrorism Squad on their way from Hyderabad to Sangli in Maharashtra, and killed in a staged encounter near Gandhinagar in November, 2005.
Prajapati, an eyewitness to the encounter, was allegedly killed by police at Chapri village in Banaskantha district of Gujarat in December 2006.