"We are treating this matter seriously. We will give direction to the Centre to hold an investigation into the allegation of diversion of funds. The report has to be submitted in a time-bound manner and then we will call the chief secretary. We want action on ground reality," a bench headed by Chief Justice S H Kapadia said.
The bench said the allegations were of serious nature on diversion of funds and non-implementation of MGNREGA in which Rs 40,000 crore was being released by the Centre annually to the state government.
The bench posted the matter for orders on Thursday.
The bench said since the Orissa government itself is saying that some officers have been suspended, it means that there is reality in the allegation.
"What nonsense is going on," the bench, also comprising justices K S Radhakrishnan and Swatanter Kumar, asked and told senior counsel T S Daobia, appearing for the Centre, to look into the matter.
"You (the Centre) are granting funds but you are not taking steps. All funds are going waste," the bench said.
The bench also wanted to know from the Centre the steps it intends to take on the allegations concerning Orissa.
The court was hearing a Public Interest Litigation filed in 2007 by an NGO, Centre for Environment and Food Security, alleging large-scale corruption in the implementation of the MGNREGA scheme.
The apex court had, on August 27, favoured the creation of a nodal agency to oversee the implementation of the central government's flagship social sector rural job scheme, MGNREGA.
Based on the National Rural Employment Guarantee Act in 2005, the scheme provides for legally-guaranteed 100 days of employment to at least one member of each rural household.
In October 2009, it was renamed as the Mahatma Gandhi National Rural Employment Guarantee Act.
The court wanted a nodal agency to monitor the programme in the wake of allegations in the petition that the benefits of the scheme were not percolating down to the targeted beneficiaries.
The court had said that there was a need for the nodal agency at the Centre to ensure that the guidelines for implementation of the scheme are not given a go-by.
It had said it would help in bringing transparency in the project as well as accountability for violating the provisions of the scheme.
The court had also emphasised upon the need for social audit of the programme as there have been allegations that the job cards and wages are not given properly.
The apex court had also observed that the funds meant for the scheme were not reaching the intended beneficiaries.
It had said that several projects under the scheme are failing as the funds allocated for them either remain unutilised or in many cases the money ends up in the wrong hands.The petition had pointed out that while some states in the north-east and Andhra Pradesh have done a good job in implementing the rural employment scheme, the others are far behind.