A lawyers' collective immediately hailed the verdict, and asked the government and political parties not to defy the Supreme Court if Sri Lanka were to be seen as a democracy.
The ruling by the Supreme Court and read out by the president of the Court of Appeal emphasized that the Parliament Select Committee (PSC) appointed by the government to probe charges against the Chief Justice has "no legal power or authority", reports Xinhua.
"The lordships have decreed that the process that was used to impeach her Ladyship the chief justice is illegal and unconstitutional because it violates basic principles of the constitution," lawyer Deshmal Warnasuriya told reporters.
He noted that under the latest order, the PSC as well as the impeachment process becomes unconstitutional and illegal.
The impeachment process of Sri Lanka's first woman Chief Justice, Shirani Bandaranayake, over alleged financial irregularities, began in November when a PSC was appointed to probe 14 charges against her.
However, the PSC soon ran into controversy over its conduct with members being accused of blatant bias.
Key among the criticisms levelled against the committee was the refusal to grant Bandaranayake enough time to present arguments on the charges against her and cross-examine witnesses.
On Dec 6, Bandaranayake stormed out of the PSC hearings saying she was not being given a fair trial.
There are also allegations that she was insulted and called a "mad woman" by government PSC members.
Citing bias, the four opposition members of the PSC resigned after seven hearings. But the government pushed through with the hearings, eventually finding the chief justice guilty of three charges.
Bandaranayake then filed charges against the PSC at the Court of Appeal insisting that the process was unfair and therefore illegal.
Analysts insist it is highly unlikely the government will adhere to the Supreme Court ruling as Speaker Chamal Rakapaksa, brother of the country's president, has already stated that parliament was supreme.
The Lawyer's Collective urged all institutions to obey the Supreme Court ruling.
"The constitution vests the Supreme Court the sole and exclusive jurisdiction to interpret the constitution," a statement by the group made available to IANS said.
"(Thursday's) interpretation now leaves no room for further argument of the supremacy of any institution or the validity of the impeachment proceedings. In effect, the entire impeachment proceedings have become invalid."
The Collective urged all institutions, individuals and political parties to respect the rule of law.
"Lawyers Collective further urges the politicians not to push the country towards anarchy and desist from any further actions embarrassing and compromising constitutional values.
"The day politicians, political parties or any state institution decide not to follow court's decisions, Sri Lanka will cease to be a constitutional democracy, and would then be a complete authoritarian state."
