Bhilwara Trading Company Vs Bank of Baroda (Rajasthan High Court)
In Bhilwara Trading Company vs Bank of Baroda, the Rajasthan High Court addressed a petition challenging the freezing of a company’s current account following the voluntary cancellation of its GST registration. The petitioner sought directions for immediate de-freezing of its account (No. 39510200002286) maintained with the Bank of Baroda, along with a request to quash the bank’s action as arbitrary and violative of Articles 14 and 19(1)(g) of the Constitution of India. The petitioner also sought compensation for losses and inconvenience caused due to the freezing of the account.
The petitioner’s counsel submitted that the company dealt in goods classified under Chapter 10 of the Harmonized System of Nomenclature (HSN), which are exempt from the Goods and Services Tax (GST). On this basis, the company had voluntarily applied to the GST Department for cancellation of its GST registration. After due consideration, the Department approved the request and cancelled the registration with effect from January 31, 2025. However, the Bank subsequently froze the petitioner’s current account, citing directions under the GST Act, 2017 and guidelines issued by the Reserve Bank of India (RBI), which categorized accounts linked to cancelled GST registrations as high-risk. The bank’s action, according to the petitioner, was unjustified as the cancellation was voluntary and based on exemption eligibility under the GST framework.
