It said prima facie there is no reason to reject his medical report. A bench of Justices K M Joseph and Hrishikesh Roy said the house arrest order should be implemented within 48 hours.
The bench also directed Navlakha to deposit Rs 2.4 lakh, an estimated amount which the National Investigation Agency (NIA) claims as expense for making available police personnel.
It also said that Navlakha will not be allowed to use a computer and internet during his month-long house arrest.
The 70-year-old activist is in jail in connection with the Elgar Parishad-Maoist link case.
(With inputs from agencies)