Kamal Hyder, Al Jazeera's correspondent in Islamabad, says the court's decision is a vindication of his view that the Supreme Council does not have the authority to try the chief justice.
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Hyder said the decision could even represent a constitutional crisis and lead to political deadlock given that Pakistan's president, Pervez Musharraf, and his prime minister have said they would respect the findings of the Supreme Judicial Council.
On Sunday, Chaudhry addressed thousands of lawyers and supporters who had waited through the night for him to arrive in Lahore.
In a thinly veiled reference to Musharraf's government, Chaudhry said: "Nations and states which are based on dictatorship instead of the supremacy of the constitution, the rule of law and protection of basic rights get destroyed."