A division bench comprising Chief Justice J N Patel and Justice S Chakraborti directed that Banerjee be allowed to function as the vice-chancellor of the university and that his dues be cleared.
It, however, granted a stay on operation of the order for four weeks on a plea by the state to appeal before the Supreme Court against the order.
Banerjee's counsel Aniruddha Chatterjee said that the doctor, who was earlier the head of cardiothoracic department at Dr G B Pant Hospital in Delhi, had come to join as the vice-chancellor some days late due to a communication gap between the state and central governments.
The registrar of the university, in June 2011, had in an e-mail communication told Banerjee that his appointment had been cancelled owing to this and some other technical grounds.
At this, Banerjee moved the high court.
A single bench of the high court upheld the cancellation of appointment of Banerjee.
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Following this, Banerjee moved the division bench challenging the order.
The division bench today rejected the single bench order and termed the cancellation as illegal and directed the state to reinstate Banerjee as the vice-chancellor of the state health science university.