Justice Manmohan Singh said the August 30 order of the trial court was "non-speaking" and no reason was given for imposing such costs.
"I am of the view, in the facts and circumstances of the case, the impugned order is not sustainable and same is set aside," the court said.
It passed the order on Dikshit's application challenging the costs imposed on her on the ground that she was Governor of Kerala when the order was passed.
She had resigned in September first week and had arrived in Delhi on September 4, Pracha told the court.
He said that Dikshit appeared before trial court on December 20 and evidence was lead by one of the witnesses in the case.
The proceedings in the case before trial court, which had on August 30, 2014 imposed the fine on Dikshit, is at the post charge evidence stage.
While imposing the fine on Dikshit, the trial court had directed that out of Rs 3 lakh, Rs 2 lakh be deposited with Delhi State Legal Services Authority (DLSA) and Rs 1 lakh be given to Gupta.
The trial court, on August 6 last year, had framed criminal defamation charges against Gupta in the complaint filed by Dikshit.
