Nihalani, who was at the centre of the storm surrounding the censorship on the drug-themed movie, said he has always tried to follow the guidelines of the Central Board of Film Certification (CBFC).
"We welcome the court's decision. I congratulate the producers on their win. We stand by the producers. They will obviously go to a place where they can get relief. It's their right," Nihalani told reporters here.
The CBFC chairman, who appeared subdued, said the court's judgement should not be seen as a victory or a defeat.
Nihalani reiterated that the decision taken by him was as per the guidelines of the Cinematograph Act.
"I was performing my duty. I will continue to do that as the rules given to us. I don't watch the films. The file reaches me after examining committee watches it. I pass my judgement on the basis of it, like the court passed the judgement by seeing the script," he said.
Earlier, "Udta Punjab" co-producer Anurag Kashyap hit out at Nihalani, calling him an "oligarch" and a "dictator" for allegedly trying to sabotage the movie's release.
Nihalani, in turn, accused Kashyap of taking money from Aam Aadmi Party.
Kashyap, who got the support of several filmmakers including Mahesh Bhatt, Karan Johar and Aamir Khan, later moved court against the board's demands for 89 cuts in the movie.
The AAP and Congress had earlier accused Punjab's ruling SAD-BJP alliance of exercising its influence to "censor" the movie, a charge denied by the state government.