"This court will protect the wider public interest," said presiding IHC Chief Justice Athar Minallah.
Monal Restaurant is a popular destination in the Margalla Hills, with vast views overlooking the capital city.
The Environmental Protection Agency was ordered to investigate the damage caused by unrestricted construction in the national park. Climate Change Secretary Malik Amin Aslam requested the Islamabad master plan to be made public.
At the same hearing, the IHC ordered the CDA to assume command of the Margalla Greens Golf Club.
"The defense secretary should inquire about the encroachments of the navy golf course [and] take action against those responsible," Justice Minallah said on the matter.
The court also ruled against the Military Farms directorate's claim to over 8,000 acres of land, ordering instead that the land should be subsumed as part of the national park.
This is not the first time the IHC has ruled against illegal encroachments in favor of public land. On 9 November, the IHC condemned authorities for what it termed the 'degredation' of Margalla Hills National Park and wildlife sanctuary.
Last week, the IHC ordered the demolition of the Navy Sailing Club on Rawal Lake in Islamabad, citing that the Navy had encroached upon public land.