He has been allowed to continue to practice subject to a voluntary undertaking, which included a chaperone being present for all female consultations.
At the appeal hearing in the Wellington District Court, the Council's lawyer, Helen Brown, acknowledged the sexual relationship was consensual.
"But the Council doesn't agree that because it was consensual, [the woman] wasn't vulnerable."
Brown said the woman had been drinking alcohol on her first meeting with Appanna.
She read the court an excerpt from an interview with the woman.
"He asked if it would be okay if we went and did them [tests] now, and I was like, 'Ok sure let's do it' because I was drunk."
Appanna wanted her to get the swabs done before they started any kind of sexual relationship, the woman said.
During interviewing, the woman referred to another time when she met Appanna and was in a lot of pain.
"He was trying to get me to the point where I wanted to do stuff and I said, 'No I'm too sore' and he gave me a pill."
Appanna has admitted providing the woman with the STI test, providing her with midazolam, and discussing her chronic pain condition.
"[The woman] had experienced medical practitioners not helping her with her issues before and she was relieved finally someone could help her with those issues," Brown told the court.
Brown said suspension was necessary due to the serious nature of concerns around Appanna's conduct and a voluntary undertaking was insufficient.
The Australian Health Practitioner Regulation Agency suspending Appanna from practising across the ditch after the Medical Council of New Zealand advised it of the stay being granted and the fact a voluntary undertaking was in place.
Appanna's lawyer Harry Waalkens QC said imposing a suspension would be "draconian" and a disproportionate response to the minor misconduct.
"It would just finish his career."
The hearing heard there had been a police investigation in connection with potential issues involving the Harmful Digital Communications Act.
However the police investigation was now complete and no charges had been laid against Appanna.
An investigation by the Professional Conduct Committee is ongoing.
In a decision released today, Judge Stephen Harrop said there had been no material complaints against Appanna in his 24 years of practising.
He said Appanna's behaviour appeared to be "out of character" and did not suggest ongoing risk to other patients that warranted suspension.
Interim suspension would be "too severe".
He said Appanna should instead submit a voluntary undertaking suggesting conditions that he should work under.
