A bench of justices B Sudershan Reddy and SS Nijjar also indicated that if the government fails to act, it would be compelled to appoint a special officer for supervising the probe against the offenders.
The apex court also wanted to know what prevented the government from subjecting Khan and other alleged black money launderers to custodial interrogation.
Khan, who is alleged to have stashed around USD 8 billion in foreign banks, had been earlier served tax notice for about Rs 50,000 crore.
The court castigated the government for failing to interrogate Khan and other alleged offenders despite having sufficient material in the possession of investigators.
"There are instances when minor offenders are shot down for violating Section 144 CrPC, but you don't take any action against these people. We are very sorry. All these people are now free," the bench remarked expressing its dismay.
When Solicitor General Gopal Subramanium tried to make certain submissions, the bench virtually snubbed him, saying, "What the hell is going on in this country."
It then said that it was very unfortunate that the three key officials of the Enforcement Directorate investigating the black money scandal have been abruptly transferred midway into the investigation.
The bench granted time till Tuesday to the Centre to file its response failing which it said the court would be constrained to pass necessary orders.