The Chief Justice made the decision when a three-judge bench headed by him resumed hearing the suo moto case against his son this afternoon.
Attorney General Irfan Qadir again objected to the Chief Justice's inclusion in the bench, saying it amounted to a conflict of interest.
The Chief Justice, who has been criticised by legal experts for taking up the case against his son, subsequently acknowledged that the Attorney General's objection and preliminary arguments had made him come to the conclusion that he should disassociate himself from the matter.
“The Quran says you are responsible for your own actions, not your children's... We have faith and believe in Allah,” the Chief Justice said.
He contended that he had no knowledge about the son's profession or business dealings.
Saying that a special bench would be formed to hear the case, he left the courtroom.
Iftikhar again appeared in the apex court on the second day of the hearing while real estate tycoon Hussain did not come for the proceedings.
Hussain's counsel Zahid Bukhari said he was being treated for a health condition in Britain.
Geo News anchor Kamran Khan appeared in court and told the bench that the tycoon had shown him documents, including copies of Iftikhar's passport and receipts for payments, related to Iftikhar's three visits to London and one to Monte Carlo.
Khan said the documents showed that the Chief Justice's son had visited Monte Carlo with a woman. The documents further showed that Iftikhar and others had lived in expensive flats and hotels during their visits to London.
Payments for travel, accommodation and shopping by the Chief Justice's son were made with credit cards and bank accounts operated by Hussain and his relatives, Khan said. However, Khan said the tycoon had not given him copies of these documents.
Khan also submitted a written statement in court. The Chief Justice yesterday initiated suo moto proceedings against his son after several TV news channels reported on the alleged payment made by the business tycoon.
The Chief Justice has pledged that anyone, including his son, who affected the dignity of the apex court would not be spared.
But legal experts questioned his decision to be part of the bench hearing the matter.
They pointed out that code of conduct for members of the superior judiciary adopted in 2009 clearly states: “A judge must decline resolutely to act in a case involving his own interest, including those of persons whom he regards and treats as near relatives or close friend”.
The bench today observed that real estate tycoon Hussain and his counsel should not talk to the media or run any sort of campaign through the media.
Questions have been raised about the timing of the leaks regarding links between the Chief Justice's son and the business tycoon, who is known to be close to the ruling Pakistan People's Party.
In recent weeks, the Supreme Court has been pressuring the government to reopen graft cases against President Asif Ali Zardari in Switzerland.