A bench of justices V Gopala Gowda and Arun Mishra allowed the appeal of Haryana governmment on the issue.
The plea of Haryana was put forth by Attorney General Mukul Rohatgi.
The Bombay High Court had on February 15 directed the Mumbai police to register an FIR into the alleged encounter by the Gurgaon police at a hotel there on February 7.
The Haryana government had said the High Court had passed the order without even making the concerned police officials as parties to the plea filed by the brother of the slain alleged gangster.
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"Vide the impugned order, the registration of an FIR has been ordered against the officials of the petitioner herein, merely on the basis of the consensual statement given by the public prosecutor of Mumbai," the plea had said.
It had said a search operation was carried out by the police officials to nab notorious gangster Sandeep Gadoli of Gurgaon in Haryana who was involved in as many as 40 FIRs since 1999.
"The said gangster was presently wanted in eight FIRs registered for heinous crimes in Haryana alone, out of which in three FIRs, he was declared proclaimed offender. There was a reward of Rs one lakh on the head of the aforesaid gangster by Haryana Police," the plea had further said.
"Consequently, the direction for registration of FIR against the police officials of the petitioner state is not only demoralising but shocking for the entire police machinery of the state. As such, if the second FIR will be registered against the innocent police officers of the petitioner, it will be causing undue harassment and embarrassment to them," the plea had said.