The special CBI court was hearing the bail applications filed by five of the nine arrested accused.
"Material mentioned by the CBI has all been seized...so why does the agency require them behind the bars," said advocate Ashok Mundargi, who represents former Mumbai municipal commissioner Jairaj Phatak.
CBI lawyer, however, maintained that the investigation was still at a crucial stage, and the accused could influence it if let out on bail.
Special Public Prosecutor Ejaz Khan said the judicial commission's report had no bearing on the CBI's investigations.
Senior counsel Shrish Gupte, representing former MLC Kanhaiyalal Gidwani, argued that "few people getting together and building a society cannot be termed as a criminal act. Even if some officer or a bureaucrat in the process exceeded his limit and favoured them, can it be termed a criminal act?"
The hearing would continue on April 21.