The court struck down the decision of the state cabinet to demolish Errum Manzil to build the legislature complex.
A division bench of Chief Justice Raghavendra Singh Chauhan and Justice Shameem Akhter pronounced the orders on a batch of Public Interest Litigation (PIL) petitions challenging the government's decision to pull down Errum Manzil.
The court, which had reserved its orders on August 7, pronounced the same on Monday.
The bench agreed with the petitioners' argument that Errum Manzil is a heritage building and it needs to be protected.
C. Prabhakar, counsel of one of the petitioners, said they had also argued that construction of a new Assembly building will be waste of public money as the existing building is equipped to meet the requirements.
The government had argued that Errum Manzil was removed from the list of heritage structures and that the state needs a new Assembly building.
Heritage activists and opposition parties had opposed the government's decision to demolish the heritage structure.
Descendants of Nawab Fakrul Mulk, a noble of erstwhile Hyderabad State, had also opposed the plans to demolish Errum Manzil, a family palace built by him about 150 years ago.
Chief Minister K. Chandrashekhar Rao on June 27 had laid foundation stone for new legislature complex to be built at a cost of Rs 100 crore.
( With inputs from IANS )