The Gujarat High Court rejected Ms Setalvad's regular bail plea earlier on Saturday.
Activist Teesta Setalvad asked to "surrender immediately" by the Gujarat High Court in a case linked to the Gujarat riots, scored a one-week reprieve from the Supreme Court in a decision announced at 10 pm on Saturday.
Justices BR Gavai, AS Bopanna and Dipankar Datta delivered the ruling after their colleagues, Justices Abhay S Oka and Prashant Kumar Mishra, who first heard the matter in a special hearing, differed on a decision and urged the Chief Justice of India DY Chandrachud to assign the case to a larger bench.
"We find that the learned single judge of the Gujarat High Court ought to have granted some time to the petitioner to challenge the order. In that view, we grant stay for one week," the three-judge bench said in the late-night hearing, a rare occurrence on holidays and during vacations.
The activist has been on interim bail since September, but faced immediate arrest had the Supreme Court upheld the fresh high court order.
Ms Setalvad's arrest had been ordered over charges of framing innocent individuals by creating false evidence linked to the 2002 Gujarat riots.
The Supreme Court judges highlighted that even an ordinary criminal is entitled to interim relief. They also noted that Ms Setalvad, being a woman, is entitled to special protection under the law. This special consideration, along with the fact that she had been granted interim bail previously, led them to pause the high court's order.
CU Singh, Ms Setalvad's lawyer, argued that the activist had not violated any conditions of her interim bail granted last year. Despite this, the Gujarat High Court refused to stay its order for 30 days, demanding immediate surrender without providing reasons for its decision.
Solicitor General Tushar Mehta, representing the Gujarat government, contended that Ms Setalvad should receive treatment equal to that of any ordinary citizen. He accused Ms Setalvad of maligning the nation with false allegations and exploiting the riots for personal gain.
Justice Dutta responded to Mr Mehta's allegations by noting that the primary question was whether Ms Setalvad is entitled to interim bail, not the moral evaluation of her conduct.
Ms Setalvad, facing potential arrest, had quickly approached the Supreme Court for protection after the High Court order earlier in the day. The matter was swiftly referred to Chief Justice D Y Chandrachud, who assembled the three-judge bench to hear Ms Setalvad's petition.
Earlier that day, Justice Nirzar Desai of the Gujarat High Court had directed Ms Setalvad to surrender immediately. He accused Setalvad of efforts to destabilize a democratically elected government and tarnish the image of the then-chief minister and current Prime Minister Narendra Modi.
Ms Setalvad was first arrested in June last year alongside former Gujarat Director General of Police R B Sreekumar and ex-IPS officer Sanjiv Bhatt. The high court's judgment suggested that Ms Setalvad had used close associates and riot victims to file false affidavits with the aim of destabilising the government and tarnishing PM Modi's image.
The high court also suggested that granting Ms Setalvad bail could send a false signal about the leniency of a democratic country and could encourage similar actions in the future. Ms Setalvad, a Padma Shri awardee and former member of the Planning Commission, is accused of exploiting the riot victims for personal and political gain.
The Supreme Court has instructed its registry to obtain orders from the Chief Justice for listing Ms Setalvad's bail plea before an appropriate bench. The court is currently closed for summer vacation.