A four-judge bench headed by Chief Justice P Sathasivam granted life to Bhullar on the ground of delay on the part of the government in deciding his mercy plea and also on the basis of his present medical condition.
The bench, also comprising justices R M Lodha, H L Dattu and S J Mukhopadhaya, passed the order on a curative petition filed by Bhullar's wife Navneet Kaur.
Bhullar was convicted and awarded death penalty for triggering a bomb blast in New Delhi in September 1993, which killed nine persons and injured 25 others, including then Youth Congress president M S Bitta.
The Centre had earlier on March 27 told the court that it had no problem with commutation of Bhullar's death sentence to life term.
The bench had on January 31 stayed Bhullar's execution and had agreed to review its judgement by which it had rejected the 1993 Delhi bomb blast convict's plea to commute his death sentence to life term.
It had issued notice to the Centre and Delhi government on a curative petition and had also directed the Institute of Human Behaviour and Allied Sciences (IHBAS), where Bhullar is being treated, to file a medical report on the condition of the death row convict who is alleged to be suffering from mental illness.