Teesta Setalvad is accused of using the funds meant for Godhra victims for other purposes.
The Supreme Court has extended the interim protection from arrest and transit anticipatory bail granted to activist Teesta Setalvad and her husband by the Bombay High Court from May 2 to May 31 in the fund embezzlement case lodged by the Gujarat police.
The top court, however, asked Teesta and her husband Javed Anand to seek anticipatory bail from the competent forum in Gujarat.
A bench headed by Justice Kurian Joseph said if remedy is sought by Ms Setalvad and her husband then the court concerned should decide the matter on merit.
Senior advocate Mahesh Jethmalani and Additional Solicitor General Tushar Mehta, appearing for Gujarat, argued that the Bombay High Court had passed a blatantly illegal order and transit anticipatory bail should not have been granted.
Senior advocate CU Singh, appearing for Ms Setalvad and her husband, said the high court was right in granting transit bail as the alleged offence relates to an educational project in Maharashtra.
The bench, comprising Justices Navin Sinha and MM Shantanagoudar, however, observed it is a settled law that where the FIR or First Information Report is lodged, the jurisdiction lies with the court concerned of that state.
On April 5, the Bombay High Court had ordered social activists Teesta Setalvad and Javed Anand should not be arrested till May 2 in a criminal case against them filed by the Gujarat police for alleged misappropriation of funds.
The case was registered by the Ahmedabad Crime Branch on a complaint accusing Ms Setalvad and Mr Anand of "fraudulently" securing grants of Rs 1.4 crore from the union government through their NGO Sabrang Trust between 2008 and 2013.
The Gujarat police claimed that the funds were obtained to help the victims of the 2002 post-Godhra Gujarat riots, but were misappropriated or used for other purposes.