JOIN USA bench of justices Aftab Alam and R M Lodha, while taking on record the submission made by senior counsel Harish Salve on behalf of the state government, adjourned the matter till Monday for passing appropriate orders.
The bench adjourned the matter after Salve said that he needed certain instructions from the state government and would talk to the Union Home Ministry for allowing the CBI to take up the investigation into the matter.
The Centre and the state had on March 31 opposed in the apex court the demand for a judicial probe into the matter.
The state government had in its affidavit refuted the allegation that the police had killed them in a fake encounter and submitted that they lost their lives in an exchange of fire between them and the security forces.
The governments' response came on apex court notice to them on January 14 on separate petitions filed by social activist Swami Agnivesh and Pandey's 30-year-old widow Babita seeking a judicial probe into the case.
The bench had expressed displeasure over the incident and had remarked "we cannot allow the republic killing its own children."
Azad, a senior member of banned CPI (Maoist) Central Committee, and Pandey, who was dubbed by the police as a Maoist, were killed in an alleged fake encounter on the intervening night of July 1-2, 2010, in Adilabad district of Andhra Pradesh.
Seeking a judicial probe into the killings, the petition alleged the post-mortem reports of both the persons and a fact-finding exercise carried out by rights groups clearly indicated that the encounter was not genuine.
The petitions alleged Azad, 58, who carried a reward of Rs 12 lakh on his head and Pandey, 32 were shot dead from a very close range which is evident from their post-mortem reports.