The New Jersey Supreme Court ordered New York Times reporter M.A. Farber released from jail yesterday and stayed all fines against Farber and The Times pending hearing next week.

Farber has been in the Bergen County jail since Aug. 4 for refusing an order to turn his notes on a murder case over to a judge and The Times has paid $110,000 in fines under an order to pay $5,000 daily until the notes are surrendered.The Times was also ordered to pay a one-time $100,000 fine.

By its 7-to-0 action, the Supreme Court took jurisdiction of Farber and The Times appeals away from the Appellate Division of Superior Court, which had denied them. The Supreme Court called for a hearing on the case Tuesday in Trenton.

That hearing will give Farber and The Times another opportunity to argue the merits of their defense that the Constitution's First Amendment and New Jersey's shield law protect Farber's right to keep his sources confidential.

The case, posing the conflict between the rights of the press and a defendant's right to a fair trial, has caused widespread controversy among lawyers and journalists.

The Supreme Court acted on a motion by New Jersey Attorney General John Degnan, who urged it to take jurisdiction of the case and to grant the appeal - thereby forcing the Superior Court to hold a hearing on the free press vs. fair trial issue which it has consistently refused to do. Degnan said the released of Farber and suspension of all fines would assure that Farber and The Times "suffer no prejudice" during the time it takes for the merits of the case to be considered.

Superior Court Judge Theodore Trautwein imposed civil and criminal contempt penalties on Farber and The Times July 24, saying that they were designed to coerce them into surrendering Farber's notes to the judge presiding over the murder trial of Dr. Mario Jascalevich.

Farber's investigation of a series of mysterious 1965 and 1966 deaths at an Oradell, N.J., hospital led prosecutors to reopen their investigation. That probe resulted in the indictment of Jascalevich for allegedly injecting patients with lethal doses of the muscle relaxant curare.

Jascalevich's attorney subpoenaed all of Farber's notes, claiming that they may contain information useful to his client's defense. When Farber refused, trial Judge William Arnold ordered the notes submitted to him so that he could determine whether or not the defense should have them.

The contempt charges were levied for refusing Arnold's order.

Farber said he was willing to be questioned as a trial witness, but that he had promised sources he would never reveal their identity and that his promise is protected by the First Amendment and New Jersey's shield law.

After initially refusing to surrender its files, The Times gave up all its papers on the case Aug. 8, saying that it had no confidential notes and was therefore turning over only documents already available to the court.

Trautwein, however, refused to lift the fines against the newspaper. The judge said he suspected The Times had sanitized its files before turning them over and that the newspaper continued to refuse to use its power to order Farber to comply with the court order.

The Times vigorously denied the charges.

The case was further complicated because Farber has been given a reported $75,000 advance by his publisher, Doubleday, for a book he is writing on the Jascalevich case. Federal Judge Frederick Lacey, who heard one of the numerous appeals, accused Farber of having a financial interest in the convetion of Jascalevich and of being willing to give a publisher information he would not provide to a man fighting to prove his innocence of multiple-murder charges.

Farber said that he has not shown his notes to anyone, including his publisher, and his lawyer called the book irrelevant to the case.