The defence ministry's preliminary probe into the Adarsh Cooperative Housing Society controversy prima facie points to a criminal conspiracy involving top politicians, bureaucrats and generals.
Ministry sources said, on condition of anonymity since they are not authorised to speak to the media, on Friday that the inquiry did not rule out collusion between officers and promoters of the society.
They said the guilty would not be spared and a decision on the matter would be taken before the Parliament's Winter Session kicks off on November 9.
The probe, ordered by Defence Minister A K Antony, also found that the 31-storey building was a serious security concern, as pointed out by Western Naval Command Chief Vice-Admiral Sanjeev Bhasin in a letter to the navy chief.
The source said: "The building overlooks many military installations."
The ministry is in the process of tying up loose ends, such as ownership of the land and how a no-objection certificate was obtained, despite the Army being in "de facto possession" of the plot for more than 60 years.
Offer to return flats
Former navy chief Madhvendra Singh said in Jaipur on Friday that senior defence officers would return the flats allotted to them in Adarsh Cooperative Housing Society in Mumbai's posh Colaba area.
He said they were not aware that the plot was allotted to the society on the promise that the flats would be allotted to Kargil war veterans and widows.
Singh said he and former chiefs of army staff General NC Vij and General Deepak Kapoor would "have no hesitation in returning the flats".
With inputs from Jaipur