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The Supreme Court on Fridya said the army and paramilitary forces cannot use "excessive and retaliatory force" in Manipur and such instances must be probed.
A bench of Justices M B Lokur and R K Agarwal also asked the amicus curiae to furnish details of alleged fake encounters in Manipur.
The bench said it was open to the Army to conduct its own inquiries into the allegations of fake encounters in Manipur.
The court said it will also examine the claim of the National Human Right Commission that it was a "toothless tiger" and needed more powers.
The apex court was hearing a petition by one Suresh Singh seeking repeal of the Armed Forces Special Powers Act that grants special powers to the Indian Armed Forces in "disturbed areas".
Earlier, the court had said the fact that compensation has been paid to the next of kin of victims of encounter killings by security forces in Manipur "amply indicate" that such encounters were fake.
It had asked the Manipur government to apprise the court of the steps taken after compensations were paid to the kith and kin of the deceased.
The court had then also asked the Centre, Manipur government and the NHRC to submit a comprehensive report on alleged fake encounter cases in the state, including 62 such cases where FIRs have not even been lodged.
Senior advocate Colin Gonsalves, appearing for Extra Judicial Execution Victims' Families Association, had said "in all these 62 cases, not a single FIR has been lodged against any of the accused."
The bench had also asked Additional Solicitor General Maninder Singh, representing the Centre, and lawyers of the NHRC and the state government to provide requisite information to the amicus curiae, who will prepare a comprehensive chart of cases for the perusal of court.
The erstwhile United Progresive Allaince government had earlier told the apex court that findings of the Supreme Court-appointed panel's report on extra-judicial killings in Manipur had been examined at the highest level.