A bench headed by Chief Justice Dipak Misra was hearing the plea of the former ISRO scientist seeking action against former DGP Siby Mathews and others who were part of the Special Investigation Team in Kerala in 1994 which had probed the case in which he was framed.
The bench, also comprising Justices A M Khanwilkar and D Y Chandrachud, asked the counsel for Kerala whether any probe had been conducted to ascertain the role of these police officers.
"We have investigated and found no role of the police officers," the counsel for the state government replied.
"Then why was he (scientist) arrested," the bench asked.
Senior advocate V Giri, appearing for Narayanan, told the court that the entire probe in the ISRO case was found to be "malicious".
"Entire probe has been found to be malicious. The CBI filed a closure report which was accepted by the magistrate," Mr Giri said while pressing for action against the errant officers for falsely implicating Narayanan in the case.
"For 12 years, the state government refused to take any action and they are now claiming that nothing was found," Mr Giri added.
"Now departmental action is not possible due to efflux of time,"the bench said.
The top court, however, said it may enhance the compensation for Narayanan after granting him liberty to pursue the civil suit of Rs one crore filed by him earlier.
The court had on May 3 said it may consider granting Rs 25 lakh as compensation to the former scientist. Narayanan has so far received Rs 10 lakh as compensation. It had said that the compensation amount would be deducted from the salary or the pensionary benefits of the errant officers.
The CBI counsel had also said that the agency had found the case to be fake and filed the closure report which has already been accepted by the court.
The bench then asked the agency whether it had conducted any investigation to find out and fix the responsibility of the errant officer. The CBI replied in negative.
76-year-old Nambi Narayanan, while functioning as a scientist at the Indian Space Research Organisation, was arrested on November 30, 1994, over allegations of espionage.
The former ISRO scientist had filed an appeal against the judgement of division bench of the Kerala High Court which had said no action needed to be taken against the former DGP and two retired Superintendents of Police, K K Joshua and S Vijayan, who were held allegedly responsible by the CBI for his illegal arrest.
He has said the division bench had "failed to appreciate the real undercurrent that passed through the mind of the apex court, the National Human Rights Commission (NHRC) and the single judge of high court in their verdict and on untenable reasons, quashed the order of the single judge".
The top court had in 1998 granted compensation of Rs one lakh to Narayanan and the others who were discharged in the case and directed the state government to pay the amount.
Later, Narayanan had approached NHRC claiming compensation against the state government for mental agony and torture suffered by him.
The NHRC, after hearing both sides and taking into account the apex court judgement of April 29, 1998, awarded an interim compensation of Rs 10 lakh on March 14, 2001.