2010 be arrested and ordered the chairman of the National Accountability Bureau (NAB) to update the court on why that had not happened.
His order on Tuesday, coming as a populist cleric led tens of thousands of protesters outside parliament demanding that the government resign, sparked panic about an alleged judiciary-military plot to derail elections due by mid-May.
The rally and the court order has fanned instability in the nuclear-armed country as it edges towards what would be the first democratic transition of power between two civilian governments at the upcoming elections.
The economy is struggling, Taliban and other violence is at a high, the rupee is sinking, there is an appalling energy crisis and fledgling peace gains with India appear in jeopardy following five cross-border killings in a week.
NAB chairman Fasih Bokhari told Chief Justice Iftikhar Muhammad Chaudhry that the investigations into the 2010 power projects were not ready, saying it takes time to find evidence to prosecute those allegedly involved.
Chaudhry dismissed NAB's report as unsatisfactory and ordered Bokhari to report back 15 minutes later with the case files so that the court could itself point out evidence that could form the basis of a prosecution.
In March 2012, the court ordered legal proceedings against Raja, who at the time was a close aide of President Asif Ali Zardari and was water and power minister at the time the power projects were set up.
But on Thursday, a defiant NAB told the Supreme Court it was a constitutional court and therefore was not able to investigate the case.
"Our mandate is to ensure the judgment is implemented. We have based the entire judgment on documentary evidence," hit back Chaudhry.
"There may be some persons who consider themselves to be above the law. I want to tell you no-one is above law. Why your machinery is not moving against the persons concerned, what is the hurdle?" he added.
On Thursday, an estimated 25,000 people led by populist cleric Tahir-ul Qadri moved into the fifth day of what is the largest rally in the capital since the current government took office in 2008.
Interior Minister Rehman Malik threatened overnight to disperse the crowd, but President Asif Ali Zardari quickly intervened to stop authorities from using force.
A decision by the main opposition parties not to join Qadri but instead call on the government to set an immediate timetable for elections, threatens to isolate the cleric, but on Thursday his supporters appeared defiant.
"I hope the administration will not take any action against unarmed and highly disciplined protestors but if they commit such a blunder, we will retaliate with full force at our disposal," said protester Muhammad Arif.
The government says parliament will disband in mid-March to make way for a caretaker government and elections within 60 days, sometime in early May but no precise date has been set.
Qadri wants parliament dissolved now and a caretaker government set up in consultation with the military and judiciary to implement key reforms such as setting up a new election commission and banning corrupt candidates.
Qadri's sudden -- and apparently well-financed -- emergence after years in Canada has been criticised as a ploy by sections of the establishment, particularly the armed forces, to delay the elections and sow political chaos.
While critics dismiss Qadri's supporters as a rent-a-crowd, many of Qadri's supporters articulate real concerns about Pakistan's problems, digging in for the long-haul, with supplies of food, water and mattresses and blankets.