Lawyers for Jamie Lee Cooke, 24, who was issued with the order by local magistrates in February, said the Asbo "criminalised his mental health problems".
However, senior judges did issue guidelines warning magistrates not to make Asbos against tho
se "truly incapable" of compliance due to their mental state.
The High Court said such orders would not protect the public and it would be wrong in law to make them.
Two senior judges were asked to clarify the law in the case of Cooke, 24, whose begging frightened passers-by.
Lawyers for Cooke said he suffered from a borderline personality disorder and post-traumatic stress. This prevented him from fully understanding and complying with the Asbo.
A court-appointed psychiatric nurse, Harjit Nijjer, gave independent evidence to the magistrates that Cooke's behaviour was symptomatic of his condition.
Mr Nijjer said an Asbo would be repeatedly breached and would amount to criminalising his mental health problems.
But Lord Justice Dyson and Mr Justice Pitchford, sitting in London, said the magistrates had been entitled to conclude that he was capable of "consequential thinking", would understand what the order required and it was not inevitable that the order would be breached.
The Asbo bans Cooke from entering Northampton town centre, begging for food or money, from possessing a knife or razor blade or using syringes in a public place, or otherwise acting in a manner likely to cause harassment, alarm or distress.
