Rajasthan High Court Directs Bank to Address Account Freezing Due to GST Registration Cancellation

Court Orders Interim Relief Allowing Transactions Pending Representation Decision for Bhilwara Trading Company

In a significant decision dated October 13, 2025, the Rajasthan High Court, presided over by Dr. Nupur Bhati, J., addressed the predicament faced by M/s. Bhilwara Trading Company following the freezing of its bank account due to the cancellation of its Goods and Services Tax (GST) registration. The case, filed under Article 226 of the Constitution of India, sought urgent relief from the arbitrary action taken by the Bank of Baroda.

The petitioner, Bhilwara Trading Company, represented by Mr. Naman Mohnot, argued that its business involves dealing in goods classified under Chapter 10 of the Harmonized System of Nomenclature (HSN), which are exempt from GST. Consequently, the company applied for a voluntary cancellation of its GST registration, which was approved by the GST Department, effective January 31, 2025.

Despite the cancellation, the Bank of Baroda froze the company's account, citing directives from the Goods & Services Tax Act, 2017, and the Reserve Bank of India, which categorize accounts with cancelled GST registrations as high-risk. This action prompted the petitioner to seek judicial intervention for the defreezing of its account to ensure smooth business operations.

The High Court, acknowledging the urgency and merit of the petitioner's situation, directed the petitioner to submit a comprehensive representation to the bank within ten days. This representation must include all necessary documents and clearly demonstrate the company's exemption from GST registration, as per Chapter 10 of HSN. The court emphasized that the bank must decide on this representation within one month, issuing a speaking order in compliance with legal standards.

Importantly, the court granted interim relief to Bhilwara Trading Company, allowing transactions from the frozen account until the bank's decision on the representation. This measure ensures that the company's business operations remain uninterrupted during the resolution process.

The ruling underscores the judiciary's role in safeguarding the rights of businesses against arbitrary administrative actions, reinforcing the principles of fairness and due process under the Constitution.

Bottom Line:

Bank account freezing due to GST registration cancellation - Account holder directed to submit representation to the bank along with requisite documents and exemption claim under Chapter 10 of HSN - Bank to decide representation within one month and allow transactions during interim period.

Statutory provision(s): Article 226 of the Constitution of India, Goods & Services Tax Act, 2017, Chapter 10 of Harmonized System of Nomenclature (HSN)

M/s. Bhilwara Trading Company v. Bank of Baroda, (Rajasthan) : Law Finder Doc Id # 2805299