Pakistan Prime Minister Yousuf Raza Gilani today sacked Defence Secretary Lt Gen (retired) Khalid Naeem Lodhi, considered close to the army chief, marking an escalation in the row between the civilian government and the military over the Memogate scandal.

The government terminated the contract of Lodhi with immediate effect for "gross misconduct and illegal action" said a statement issued by the Prime Minister?s office.

Action was taken against Lodhi "for creating misunderstanding between the state institutions", the statement said.

Cabinet Secretary Nargis Sethi was given additional charge of the post of Defence Secretary, the statement said.

The government had recently served a show cause notice to Lodhi after he filed an affidavit in the Supreme Court that contended the civilian administration had no control over the operational matters of the army and Inter-Services Intelligence agency.

He further stated in the affidavit that the government had only limited administrative control of the army and ISI.

Lodhi's affidavit angered Prime Minister Gilani, who reacted by saying it was unacceptable for the army to act as a "state within a state".

Lodhi's sacking was announced shortly after the army reacted angrily to Gilani's remarks in an interview on Monday that the army and ISI chiefs had acted in an "unconstitutional and illegal" manner in the handling of the Memogate scandal.

Gilani contended that the army and ISI chiefs had submitted responses on the memo issue to the apex court without getting the government's approval.

A confrontation between the army and the government came to a head in Pakistan today with the powerful army chief warning the Prime Minister's critical remarks against him and the ISI chief over the memo scandal could have "very serious ramifications" for the country.

Reacting sharply to Prime Minister Yousuf Raza Gilani's contention that the army chief Gen Ashfaq Parvez Kayani and ISI chief Lt Gen Ahmed Shuja Pasha had acted in an illegal manner in the memo scandal, a terse army statement said these remarks could have "very serious ramifications with potentially grievous consequences".

"There can be no allegation more serious than what the honourable prime minister has levelled against COAS and DG ISI (army chief and spy chief) and has unfortunately charged the officers for violation of the constitution of the country," said the army's statement.

"This has very serious ramifications with potentially grievous consequences for the country."

Just minutes after the strongly worded warning by the army, Gilani sacked Defence Secretary Lt Gen (retired) Khalid Naeem Lodhi, considered close to the army chief, marking an escalation in the row.

The fast-paced developments came as the government was on a collision course with the judiciary too, with the Supreme Court warning yesterday that action could be taken against both the President and Prime Minister for failing to act on a court order to reopen corruption case against President Asif Ali Zardari.

Earlier, Zardari made it clear that he did not intend to resign even as an urgent session of parliament has been called to consider the situation.

Zardari through his spokesman refuted reports that he had offered to resign at a meeting of his Pakistan Peoples Party (PPP) and its allies late last night.

Two days after Gilani had said that the army and ISI chiefs had filed affidavits on the memo issue in the Supreme Court without obtaining the government's permission, the powerful military said there could be "no allegation more serious" than that made by the premier.

Gilani had made the remarks during an interview with the online edition of China's state-run People's Daily on Monday.

He said replies filed by army chief Kayani and ISI chief Pasha to the Supreme Court in connection with the alleged memo did not have the approval of the competent authority as required under the rules of business.

He further said no formal proposal seeking the approval of the competent authority for these two replies was initiated by the Defence Ministry.

No approval was obtained for the replies from the Defence Minister and any official action by a government functionary without the government's prior approval is "unconstitutional and illegal", Gilani had said.

Sources said the military leadership had gathered details about Gilani's remarks during the interview.

The matter was then assessed by Kayani and top army commanders yesterday so that the military could issue a formal response, the sources told PTI.

The military statement contended that Gilani's remarks did not "take into account" some "important facts".

It further contended that the army and ISI chiefs were not responsible for obtaining approval for the replies they had sent to the Supreme Court.

The statement said the army and ISI chiefs were named as respondents in petitions filed in the apex court regarding the alleged memo and the court had "served notices directly to the respondents".

This was not objected to by the Attorney General, it said. The responses of the army and ISI chiefs were sent to the Defence Ministry for submission to the Supreme Court through the Attorney General.

A letter was dispatched to the Attorney General and the apex court, informing them that the replies of the army and ISI chiefs had been submitted to the Defence Ministry.

"It is emphasised that copies of the statements of the two respondents were not forwarded directly to the Supreme Court," the military statement said.

"Responsibility for moving summaries and obtaining approvals of competent authority thereafter lay with the relevant ministries and not with the respondents," the statement added.

The military pointed out that following a meeting between the Prime Minister and the army chief on December 16 last year, Gilani had stated in a press release that the replies submitted to the apex court were "in response to the notice of the court through proper channel and in accordance with the rules of business".

"No objections were raised before and thereafter on the legality and constitutional status of the replies, at any time, during the last more than three weeks of hearing of the case by the Honourable Supreme Court," the statement said.

The military contended that the army and ISI chiefs, in their responses to the Supreme Court, were "obliged to state facts as known to them on the memo issue".

The issue of jurisdiction and maintainability of the petitions involved the apex court and the government, it said.

"Any expectation that (the army chief) will not state the facts is neither constitutional nor legal. Allegiance to state and the Constitution is and will always remain prime consideration for the (army chief), who in this case has followed the book," the statement said.

The civilian government and the military have adopted divergent stands when the apex court took up the alleged memo that had sought US help to stave off a possible military takeover after Osama bin Laden was killed in Pakistan in May last year.

The government challenged the court's jurisdiction to hear the matter, saying it was already being investigated by the Parliamentary Committee on National Security.

The army and ISI chiefs urged the court to conduct an independent probe.

The alleged memo, made public by Pakistani-American businessman Mansoor Ijaz, has shaken up Pakistan's political and diplomatic circles and increased pressure on the weak government from the powerful military.