Chaudhry's return to Fiji raised hackles in the tropical heat, where the court's decision sparked fears of a re-run of the violence against the large Indian minority which exploded after Speight's nationalist putsch.
"The army regards Mahendra Chaudhry as a threat to national security, if he returns as prime minister," reported the Sunday Times, quoting unnamed military sources.
The 3800-strong army is reserved for indigenous Fijians and is seen as the real power in Fiji. The military took control while Speight held Chaudhry and most of his multi-racial cabinet for 56 days and did not relinquish power after he was released.
In addition to declaring the government of Prime Minister Laisenia Qarase illegal, the Court of Appeal said on Thursday that the 1997 Constitution, which gave political rights to the 44 percent of Fijians who claim Indian descent, remained the law.
It indicated that the suspended parliament should reconvene to cement a return to constitutional, democratic rule.
Chaudhry, deeply disliked by many indigenous Fijians, said in a trip to India that the ruling meant he was still in charge.
Yesterday, he was more subdued and said a decision on whether he is still Prime Minister lay with his Labour Party and the People's Coalition which formed his ousted Government. He said he had the support of his party.
Qarase originally pledged to abide by the court's ruling. But he now appears to be trying to stall.
President Ratu Josefa Iloilo is due to meet with the Great Council of Chiefs, a cabal of traditional indigenous rulers, on March 8. He would then announce the Government's final response.
Chaudhry's return has whipped up controversy.
"Saint or Satan?" asked columnist Liu Muri. Concluding that Chaudhry's style had been divisive, Muri said he should renounce his claim to office.
"Chaudhry should be man enough to admit that he had an opportunity to make a difference but he has stuffed it up," he wrote in the Sunday Post.
Fiji's first leader to come from the descendants of Indian labour brought in 200 years ago by the British colonial powers to work the sugar plantations, Chaudhry won office in 1999.
But indigenous Fijians are now insisting the Prime Minister's post be reserved for a Fijian in order to guarantee stability.
Chaudhry said that would not be acceptable.
"I will never submit to racism in any form," he said. "If it's simply because I'm an Indian that I'm not wanted as a leader, then that is racism of the South African type."
Chaudhry and other deposed parliamentarians, meanwhile, say they have enough signatures to reconvene the chamber and pick a prime minister, noting the Council has no say in that.
Chaudhry may also face internal dissent. The Labour Party will meet next week and might pick a new coalition leader.
"There is going to be those who strongly support him and those that, well, reflect the views of the current political situation," deposed co-deputy prime minister Tupeni Baba, an indigenous Fijian, told the Sun newspaper.
- REUTERS
Transcripts: Fiji Court of Appeal judgment
Audio
(9 minutes, Courtesy FM96)
Herald Online feature: the Fiji coup
Full text: Fiji High Court rules in favour of Chaudhry
Fiji President names new Government
Main players in the Fiji coup
The hostages
Fiji facts and figures
Images of the coup - a daily record