The court directed the government to forthwith return the passport of Rohit Goswami, who was running a business abroad, rejecting its contention that the step was taken in public interest.
The order revoking the man's passport was "plainly without authority of law and cannot be sustained", the court said, adding that such action which impinges on a citizen's fundamental rights "has to be justified by overwhelming public good and larger public interest".
Justice Vibhu Bakhru said it was the conceded position that the Indian Embassy had taken away the man's passport to put "pressure" on him and the action taken by them was "wholly without authority of law and contrary to the provisions of the (Passport) Act".
"It is clear that the action of the embassy officials - the first secretary and the ambassador - to take away the passport of the petitioner was a blatant abuse of their authority and wholly illegal.
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It said the effect of cancelling Goswami's passport would effectively deprive him from carrying on his business which he had established in Ukraine and such an action of revoking his passport seriously curtails his fundamental rights.
"Plainly, such action which impinges on a citizen's fundamental rights, has to be justified by overwhelming public good and larger public interest, to fall within the scope of 'in the interest of general public' as used in section 10(3) (c) of the (Passport) Act," the court said.
"The decision of revoking the petitioner's passport on account of a dispute relating to a private transaction, can under no circumstances be termed as 'in general public interest'," the court said.
The man had approached the court challenging the decision of the Centre to revoke his passport saying it was done without following the principles of natural justice and authority of law.
His passport was cancelled by a communication of April 25 last year on the ground that he had failed to respond to the show cause notice issued by the ambassador within the extended time as provided to him.
He said that the passport was revoked in public interest and the said decision could not be faulted.