Opposing the plea, the State government said the investigation was in a preliminary stage and the role of the highly influential persons was suspected.
The director-general of the prosecution submitted that government officials, including village officers, were facing investigation and whatever came out so far is only the tip of an iceberg.
The trees were looted by misinterpreting a government order, he submitted.
Considering the government's stand, the court refused to stay the investigation.
Meanwhile, considering another plea challenging the government's decision to seize the trees, the High Court sought to know what action has been taken against the officials who gave permission to ax the trees.
The court observed that a vigilance probe has to be issued against the officials responsible for it.
The Opposition Congress-led UDF raised the issue in the Kerala Assembly on Tuesday.
Raising the issue, the Opposition has accused the LDF government of shielding the culprits in the mass felling and smuggling of centuries-old rosewood trees from Muttil.
Admitting that the government order was misused for felling the trees illegally, Kerala Forest Minister A K Saseendran has said a total of 101 rosewood trees, worth around Rs 10 crore in the market, were found missing from the village.