Will notification get cancelled once court has issued stay order for appointments

If the court has issued stay orders for this recruitment process then the process will now be stalled and it will be delayed in the court proceedings. If the judgement of court goes against the recruitment process then the process adopted so far will be cancelled and it will be restarted and new selection process will start where your sister can again participate. If the court dismisses the case then appointment letter will be issued to the selected candidates and they will be asked to join the post accordingly.

Now, you have to find out that what is the exact thing against which the stay order is being sought. If it is against the particular process then you have to wait for the verdict but if it is for something else and not particularly for this process where the name of your sister is in the selected list then within the same court case you and the other affected people can give an application and pray the court for releasing the appointment letters at an earliest as that is clearly delinked and not connected with the stay issue. Court can in such cases direct the department to issue the appointment letters as they are unnecessary being held by the department.

You have to take the advice of a good lawyer in this case who can guide you correctly in this matter.

Generally, once the court has given a stay order means, the process will be stopped till the court case is finalised and a verdict has been given. Further development will depend on the court's verdict. If it dismisses the case filed against selection, the employer will send the appointment letters and then she can join. If the court verdict is given in favour of the applicant, the whole process will be cancelled and fresh process of recruitment will start. Then your sister has to appear for the whole process as per the notification. One has to wait for the court case finalisation.
Sometimes the case in the court may be not about the selection process and it may be disqualification of a particular candidate or related to an individual. In such a case, there is no point in waiting for the finalisation of the case. In such a case, you have to approach the court for vacating the stay for all other people who are unnecessarily getting a loss.
If you know some other candidates who are also waiting for an appointment like your sister, all of them can go to the court. For this, you may require the help of a good lawyer who is well versed in such cases.

Yes, there are chances of cancellation of whole notification, if the court judgement will against the recruitment process. As court has already issued an stay order against the appointment. In this case whole appointment process will be on hold till the final judgement. You can wait or you can also approach the court with other candidate, if this case is not for whole recruitment process.