Justice A K Chawla issued notice to the ministry of external affairs and asked it to file their stand by August 16 on the plea by Pramod, who is steel tycoon Lakshmi Mittal's younger brother.
The high court, however, did not stay the August 8 order of the ministry issued against Pramod, who has to submit his passport before the authorities concerned within seven days.
In March this year, the CBI registered a case of cheating and corruption against Pramod Mittal and former top officials of the State Trading Corporation (STC) for allegedly causing a loss of Rs 2,112 crore to the public sector undertaking.
The case was registered on the basis of a complaint from PSU STC.
The petition of Pramod Mittal, former chairman of Global Steel Holdings (GSHL), was filed through his representative Uday Pratap Singh.
Senior lawyers Kapil Sibal and Siddharth Luthra appeared for the businessman who has sought a stay and quashing of a May 16 show cause notice issued to him on why his passport shuld not be impounded.
Since he did not respond to the show-cause notice, the authority concerned passed an order on August 8 for impounding his passport.
The CBI has alleged that Pramod Mittal has committed "criminal breach of trust" as he failed to make payments as per terms and conditions of the agreement with STC.
However, his lawyers today told the court that "This is actually a civil/financial dispute in which they say that I (Pramod) have to pay the money. I will do so but why stop me from doing my business. My right under Article 21 (protection of life and personal liberty) is being threatened and violated."
"This is a dispute between me (Pramod Mittal) and the STC, why target me by impounding my passport. This order of impounding is simply bad in law," the lawyers argued.
The central government standing counsel, Ajay Digpaul, opposed the contention, saying "we do not want another Vijay Mallya case".
Businessman Vijay Mallya, accused of defaulting on bank loans, had fled the country and the government has been struggling to bring him back from the UK.
Mr Digpaul said that earlier "we have issued him a show cause notice to reply in seven days, in which he asked for further time and had instead approached this court".
In the order for impounding his passport, it has been stated that the High Commission of India, London has been informed that a large number of criminal cases are still pending against Pramod Mittal.
"You have defaulted a large sum to the STC. Further, as on June 20, an amount of approximately USD 469.77 million was outstanding from Global Steel Philippines Inc (GSPI)/GSHL along with future interest.
"Furthermore, the payment proposals referred by you (which you had mentioned in your letters of July 4 and 11) have been rejected by the Department of Commerce and STC. According to Ministry of Commerce, you still owe a huge public money to a central PSU and a large number of criminal cases are pending against you," the order said.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)