The fake encounter case that has put the Gujarat government on the backfoot seems to have affected the relationhip between Chief Minister Narendra Modi and Minister of State for Home Amit Shah.

Shah, once regarded as Modi's blue-eyed boy, seems to have fallen out of the latter's favour with the result that he is conspicuous by his absence in Cabinet meetings and public functions, political sources in Ahmedabad said.

Modi is particularly unhappy over the manner in which fingers have been pointed at Shah in connection with the fake encounter involving Sohrabuddin Sheikh, which is causing him political embarrassment during an election year, they said.

The official reason given by Shah, however, is that he is unable to attend Cabinet meetings because of ill-health.

Shah was the only minister not present at the state foundation day celebrations in Junagadh on May 1.

Sources in the state Secreteriat said Shah has hardly been coming to office after the arrest of three IPS officers for alleged involvement in the killing of Sheikh, who was described as a Lashker-e-Tayiba terrorist and gunned down.

"Shah, who is the MLA from Ahmedabad's Sarkhej constituency, was an active supporter of Modi during the term of former chief minister Keshubhai Patel," a source pointed out.

However, after the fake encounter case, Shah has been sidelined by Modi and this is evident from the way in which he is being kept out of public functions and Cabinet meetings, the sources said.

The Cabinet on Thursday examined the implication of the Supreme Court order on the fake encounter case, in which the apex court directed the state to submit a final status report in two weeks, government sources said.

"When the issue of the fake encounter was to be discussed in the Cabinet, Shah was absent from the meeting," a source pointed out.

The Congress has accused Shah of hatching a conspiracy to kill Sheikh, an alleged extortionist, in the fake encounter.

The opposition party has also accused the minister of creating hurdles in the way of investigations into the case.

The Congress has demanded Shah's resignation and wants him to undergo narco-analysis and brain mapping tests.

The home department under Shah was responsible for removing IG CID (Crime) Geetha Johri from the inquiry into the fake encounter, the sources said.

The Supreme Court on Thursday also sought a report from the state government on an allegation that Johri, who headed the team that conducted a preliminary inquiry into the fake encounter, had been taken off the investigation.

Johri, credited with having done much to nail the three senior IPS officers allegedly responsible for the killing of Sheikh, has now been given full charge of the probe.