The Bombay High Court said on Tuesday that it would decide whether negligence on the part of the Brihanmumbai Municipal Corporation (BMC) contributed to the fire at Hotel City Kinara in suburban Kurla in 2015.
The fire had claimed eight lives.
A division bench of Justices Akil Kureshi and S J Kathawalla said it would also decide whether a compensation should be given to the families of the deceased.
A fire broke out at the hotel on October 16, 2015. Seven of the victims were students aged between 18-20 years. The eighth victim was a 31-year-old engineer from Virar near Mumbai.
Parents of the victims moved the high court against the Lokayukta's February 2017 order which dismissed their complaint seeking a probe. A compensation of Rs 1 lakh each had been paid, the Lokayukta noted in the order.
"We will hear the petition and decide whether there was any negligence on part of BMC officials. We will also consider whether compensation should be awarded to the families though such a specific prayer has not been made in the petitions," the high court said.
"In view of the tragic loss of human lives, we would like to consider the issues raised, in particular whether compensation is to be paid to the victims' families and whether liability can be attached to the BMC for negligence," Justice Kureshi said.
The next hearing would be on September 17.
The BMC, in its affidavit filed on Tuesday, said it had conducted a departmental inquiry against four officials and two were found guilty.
They were duly punished, said BMC counsel Anil Sakhare.
The civic body further claimed that it cannot be held liable to pay compensation to the victims' families, and the hotel owner should be directed to pay compensation.
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