Indra did not use his full force on Arjuna and Krishna, perhaps, due to the following reasons.
a) It is due to neither inability to counter nor fatherly affection towards Arjuna, that Indra did not use his full force against Arjuna. Indra is the King of Devas and Agni is part of Devas troop.
Agni had been trying to devour Khandavana for long, but each time Indra stopped him, just to save his friend Takshaka, a great serpent residing in that Khandava Forest from getting killed in the fire. Agni himself stated this to Arjuna.
वसत्यत्र सखा तस्य तक्षकः पन्नगः सदा । सगणस्तत्कृते दावं परिरक्षति वज्रभृत् ॥
तत्र भूतान्यनेकानि रक्ष्यन्ते स्म प्रसङ्गतः । तं दिधक्षुर्न शक्नोमि दग्धुं शक्रस्य तेजसा ॥
In this forest lives a Naga named Takshaka, who is a friend of Indra. For his sake, many creatures here are safe under Indra's guard.' I wish to consume the forest, but I cannot succeed because of Indra's power.
Though Indra is not against Agni consuming that Forest, he was intervening just to protect his friend Takshaka.
b) When Arjuna and Shri Krishna stood guard on the either side of Khandava Forest, to allow AGNI devour the Forest along with all the being living therein, Indra’s friend Takshaka was not present in that Khandava Forest at that time.
तक्षकस्तु न तत्रासीत्सर्पराजो महाबलः ।
दह्यमाने वने तस्मिन्कुरुक्षेत्रेऽभवत्तदा ॥
It so happened that while that forest was burning, Takshaka, the chief of the Nagas, was not there, having gone at that time to the field of Kurukshetra.
c) And, Indra assisted Takshaka’s son Ashwvasena to escape from that fire.
तं मुमोचयिषुर्वज्री वातवर्षेण पाण्डवम् ।
मोहयामास तत्कालमश्वसेनस्त्वमुच्यत ॥
Indra by raising a violent wind, deprived Arjuna of consciousness. During those few moments, Ashwasena succeeded in effecting his escape.
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Thus, Indra’s main motive was served. There is no further reason left for Indra to counter Arjuna. And, by withdrawing strategically, Indra made AGNI achieve his goal of devouring that forest.
