Malay Mail reported that the Federal Court panel, headed by Chief Judge of Malaya Tan Sri Zaharah Ibrahim, unanimously freed Karpal of his alleged offence in 2009.
"We allow both appeals against the conviction and sentence against the appellant," she said, before adding that the bench will not consider other grounds in the appeal.
The seven-man panel also included Chief Judge of Sabah and Sarawak Datuk Seri David Wong Dak Wah, Tan Sri Ramly Ali, Datuk Alizatul Khair Osman Khairuddin, Datuk Abang Iskandar Abang Hashim, Tan Sri Idrus Harun, and Datuk Nallini Pathmanathan.
The bench cited a "substantial miscarriage of justice" in Karpal's case
Zaharah said that there were serious "misdirections" of law by both the High Court and the Court of Appeal that convicted and upheld the ruling against Karpal respectively.
"In the circumstances of this case, we are of the view that the failure is a serious misdirection and had occasioned a substantial miscarriage of justice which is not curable under the proviso to Section 92(1) of the Courts of Judicature Act," Zaharah said, according to Malay Mail.
Free Malaysia Today reported that the Chief Judge also detailed the failure of judges to consider Karpal's defence in their rulings.
Although the law required Karpal's defence to be considered by the trial judge, the judge eventually "merely relied on the judgement of the Court of Appeal", according to Zaharah.
She added that another Court of Appeal ruling against Karpal in 2016 also failed to consider his defence.
The former DAP leader was found guilty of sedition in 2014, and was sentenced to a RM4,000 fine
Karpal was charged in 2010 for questioning the late Sultan Azlan Shah over the removal of Perak's former menteri besar Datuk Seri Mohammad Nizar Jamaluddin during the 2009 constitutional crisis.
He died in an accident on the North-South Expressway two months after his conviction in 2014. His widow, Gurmit Kaur, became the substitute appellant in the case.
In 2016, the Court of Appeal upheld Karpal's conviction despite reducing the initial RM4,000 fine to RM1,800.
Justice Datuk Hamid Sultan Abu Backer previously alleged foul play in the Court of Appeal's 2016 decision against Karpal. Read more about it here: