Awarding the compensation, a bench of Chief Justice Dipak Misra, Justice A.M. Khanwilkar and Justice D.Y. Chandrachud also directed the setting up of a committee to inquire into the role of erring officials who Narayanan said had implicated him in the alleged Indian Space Research Organisation (ISRO) spy case.
The court verdict has come on a plea by Narayanan seeking a probe into the false case hurled by the Kerala Police and other agencies.
Narayanan had moved the top court challenging a Kerala High Court judgment that upheld the state government's decision not to take action against the officials who falsely implicated the scientist in the case in the mid-90s.
The CBI cleared him in 1995 and since then he has been fighting a legal battle against Siby Mathews and the other officials who probed the case.
Narayanan approached the apex court after a Kerala High Court bench dismissed a single bench order that directed the Kerala government to take action against three retired police officers who had implicated and arrested him.
Reacting to the verdict, the veteran space scientist, who spent 50 days in jail, said he hoped the committee will finish the job in three to six months.
"This is a long fought case or rather a judicial war. Today's verdict is better than before. Let the committee come out with the conspiracy behind all this. With this verdict, the police officials should realise that they cannot escape the actions of what they do," he said.
Mathew and Vijayan refused to comment on the apex court verdict.
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