In a hearing seasoned by hypothetical questions, references to Catch 22 and appeals for help in finding a solution, the New Jersey Supreme Court yesterday heard three hours of argument on the conflicting rights of a reporter to protect his sources and of a defendant to a fair trial.

The New York Times and Time reporter M. A. Farber asked the seven justices to reverse contempt citations against them that sent Farber to jail for 26 days and cost the Times $110,000 in fines at $5,000 a day for refusing a judge's order to surrender Farber's notes on an alleged murder case.

The Supreme Court freed Farber and suspended the fines last week pending its action in the case, which began when attorneys for Dr. Mario Jascalevich subpoenaed all of Farber's notes, claiming that they may aid his defense against charges that he murdered three people by injecting them with lethal doses of the muscle-relaxant curare.

Prosecutors reopened their investigation of the deaths after Farber began reporting about the case almost 10 years after the deaths occurred. This led to Jascalevich's indictment.

Jascalevich's attorney, Raymond A. Brown, told the court yesterday that Farber has no protection under New Jersey's shield law, designed to guard the confidentiality of reporter's sources, and also claimed that the Constitution does not shield him because he was collaborating with the prosecutors against Jascalevich.

"This man is not a reporter, he's an investigator," Brown charged.

Floyd Abrams, attorney for Farber and the Times, dismissed such charges, and said the only "allegation" against Farber was that he had fulfilled the function of an investigative reporter too well for Jascalevich's liking.

Justice Morris Pashman reflected the concern of the court in the face of a complicated case that has been made additionally complex by lower court rulings when, at one point, he asked Abrams a question and added: "We need some help."

"We need a lot of help," Justice Alan B. Handler quickly added.

The confusion of the case through which the court will try to steer its way was also exemplified in the argument of New Jersey Attorney General John Degnan.

Degnan urged the Supreme Court to order the lower Superior Court to hold a hearing on the issues raised by Jascalevich's subpoena of Farber's notes, but did not ask the justices to reverse the jail sentence and fines imposed on Farber and his newspaper.

Chief Justice Richard J. Hughes asked Degnan how the court can on the one hand order a new hearing because a wrong was committed by the lower court and leave the already-imposed penalties in effect pending the hearing.

"Can you find a man guilty and then hear the evidence?" Justice Pashman asked.

Under questioning, Degnan conceded that he was not "entirely comfortable" with his position.

Arnold acted without holding a neys what kind of hearing they should order if they decide a hearing should be held.

Abrams said such a hearing should consider whether the subpoena was too broad, whether the information sought is available from other souces, whether it is relevant and vital to Jascalevich's defense and whether there are other, less sweeping ways to obtain it.

Jascalevich trial Judge William Arnold ordered Farber's notes submitted to him for his decision about whether they should be turned over to the defendant.

Arnold acted without holding a hearing. The Times and Farber have sought to gain a hearing by their appeals, and yesterday was the first opportunity they had in court to make their case that the state shield law gives Barber an absolute protection against handing over his notes, while the U.S. Constitution's First Amenment also affords him protection.

Abrams told the justices, however, that Farber is prepared to waive his rights and surrender certain types of information if the order for all his records is vacated.

The court reserved a decision on the case to a later date.

Dan Paul also appeared before the court, arguing in favor of the Times and Farber. Paul, the general counsel of The Miami Herald, appeared on behalf of 33 news organizations, including two wire services, three television networks, The Washington Post and the Los Angeles Times.