A reexamination Sunday of secret Israeli documents on the 1982 Beirut refugee-camp massacre found no basis for the part of a Time magazine article that led former defense minister Ariel Sharon to file a $50 million libel suit against the magazine, according to Israeli Radio and sources here.

The finding appeared to be a setback for Time's defense only days before the case is scheduled to go to a jury. The controversial paragraph suggested that the documents contained information that Sharon had known that the killings of hundreds of Palestinians would occur and that he acquiesced in them.

Retired Israeli chief justice Yitzhak Kahan, who headed the original Israeli investigation into the killings, reviewed key classified documents related to Sharon's role and responded negatively to three questions submitted by the New York federal judge presiding over the libel trial here, according to sources and the broadcast.

Two Israeli lawyers, one representing Time and the other Sharon, were permitted to inspect the classified papers as Kahan reviewed them.

According to Israeli Radio, Time's lawyer in Israel, Haim Zadok, "expressed reservations" about Kahan's answers, but his concerns were not made public.

Sources close to Time, according to the broadcast, also complained that the government had not allowed Zadok to fully inspect two of the documents it had promised. In New York, lawyers for both sides also said they did not know how the review's results would be presented to the jury.

Kahan's responses were telexed here late Sunday to the lawyers and U.S. District Court Judge Abraham D. Sofaer shortly after the examination was completed. The Israeli government released Kahan's letter early this morning.

A Time spokesman said Sunday: "This information was intended for release in federal court, if anywhere. Now that the Israeli government, contrary to their original agreement, has announced that they will release it imminently, we have to consider the situation further before commenting."

The Israeli commission that investigated the massacre had concluded that Sharon bore "indirect responsibility" for the killings because he failed to foresee their possibility when he allowed Lebanese Christian militiamen into the refugee camps after Israel's invasion of West Beirut in September 1982. However, the commission absolved Sharon and other top Israeli officials of direct responsibility or advance knowledge of the massacre.

The Time story had suggested deeper involvement by Sharon. One paragraph said the commission's report included a confidential appendix containing details of a conversation Sharon had with Lebanese Christian leaders the day before the killings. According to the magazine, Sharon allegedly discussed the need to take revenge for the assassination a day earlier of President-elect Bashir Gemayel, the militiamen's commander.

Sharon denied the report, which he called blood libel, and sued Time.

Late last month an agreement was reached with the Israeli government for Kahan to reexamine the appendix and other information the commission had collected.

The questions the court had sent to Israel dealt with whether Sharon had discussed with Bashir Gemayel's family the need to avenge his death; whether Sharon had conversations with the Gemayels or other Christian leaders in which either mentioned the need for revenge; and whether the documents contained any evidence or suggestion that Sharon knew in advance that the militiamen would massacre civilians if they went into the camps unaccompanied by Israeli soldiers.

Kahan answered negatively to all three, the broadcast and sources said.