Unwarranted Coercion By Attaching Bank Accounts Without Show Cause Notice Violates Article 300A Constitution: Bombay High Court
The Court rapped the tax authorities for freezing a bank account without following due process, characterizing the action as an unwarranted abuse of power.
Justice G. S. Kulkarni, Justice Aarti Sathe, Bombay High Court
The Bombay High Court, while setting aside the provisional attachment of the bank accounts, observed that unwarranted coercion by attaching the bank accounts without issuance of a show cause notice is against the valuable right guaranteed under Article 300A of the Constitution of India.
The Court observed that the department’s simultaneous issuance of pre-attachment notices and attachment orders bypassed mandatory legal safeguards.
The Court emphasized that the power to provisionally attach property under Section 83 of the GST Act is draconian and must be supported by a validly formed opinion based on tangible material, rather than the subjective discretion of an officer.
Concluding that the officer had ignored the Petitioner’s offer of alternate security and caused serious prejudice to their business, the Court directed the Joint Commissioner of State Tax to deposit ₹25,000 as costs for the "apparent abuse of powers" and for taking the "rule of law to ransom".
The Division Bench of Justice GS Kulkarni and Justice Aarti Sathe observed, “The Petitioner had not only furnished correct legal information but also provided an alternate security to avoid such drastic action of attachment of the petitioner’s bank account. However, the officer remained satisfied on maintaining such attachment. Thus, the whole approach of the concerned officer was of unwarranted coercion by attaching the bank accounts and that too without issuance of a show cause notice. Such attachment has continued to operate for three months depriving the Petitioner of the valuable right guaranteed under Article 300A of the Constitution of India apart from the petitioner being put to a live death on the business being brought at a standstill. This has certainly resulted into civil consequences and serious prejudice to the Petitioner in complete breach of the principles of law.”
Advocate Ishaan V. Patkar appeared for the Petitioner, while Assistant Government Pleader Amar Mishra appeared for the Respondents.
Facts of the Case
The Petitioner, a limited liability partnership, approached the High Court under Article 226 of the Constitution to challenge the orders of provisional attachment of its bank accounts. The Joint Commissioner of State Tax (Investigation-A) issued notices to the Petitioner’s bankers, namely Punjab National Bank and Saraswat Co-operative Bank Limited, attaching their accounts under Section 83 of the GST Act.
Although a pre-attachment communication in Form GST DRC-23 was issued on the same day, the actual attachment orders to the banks were dispatched simultaneously. The department initiated these proceedings under Section 67(2) to determine tax liabilities, citing the protection of government revenue as the primary reason for the freeze.
Contention of the Parties
The Petitioner contended that the provisional attachment was a draconian action executed in complete violation of the basic principles of law and settled legal precedents. Learned counsel for the Petitioner argued that the authorities failed to form a valid opinion based on tangible material before ordering the attachment, as mandated by the Supreme Court in the case of Radha Krishan Industries. It was further submitted that although the Petitioner addressed a detailed objection on 30th January 2026 and offered alternate security, the authorities ignored the representation and continued the attachment. The Petitioner maintained that the action was high-handed, arbitrary, and bypassed the due procedure established by law
The Respondents, represented by the learned AGP, were unable to provide any justification for the attachment beyond what was reflected in the impugned communications. The department relied on its powers under Section 83 to justify the provisional freeze as a means to protect government revenue during the pendency of investigations.
Observations of the Court
The Court observed that the impugned action was an apparent abuse of the powers vested in the authorities and a serious breach of the Petitioner's civil rights. The Bench noted that the mandate of Section 83 was conveniently overlooked and that there was absolute vagueness in the pre-intimation notice issued by the department.
Relying on the principles of proportionality, the Court held that the power to levy a provisional attachment must be exercised only when necessary and must bear a proximate and live nexus to the purpose of protecting revenue.
The Court held, “We are thus in complete agreement with Mr.Patkar as we find that certainly the impugned actions are in violation of the law and an apparent abuse of the powers which are vested with the authorities under the provisions of the Act. It is well settled that when such power to take drastic action is conferred on the authorities, it is coupled with an onerous duty to adhere to the provisions of law and the procedure so established. There cannot be a conscious departure from such mandatory requirements of law. Any action on the part of the officers who are supposed to act within the framework of law, cannot be taken in a high handed manner and/or for extraneous considerations, as rightly contended by Mr.Patkar. It is the rule of law which is taken to the ransom by such officials when they knowingly breach the law, that too with impunity.”
The Court further remarked that such drastic power is coupled with an onerous duty to adhere strictly to the law, and any conscious departure from mandatory requirements constitutes an act of high-handedness.
“We find ourselves in agreement with Mr. Patkar. It is difficult to believe that the officers who are vested with such draconian powers are not aware as to how the same is required to be exercised as the law would mandate. Moreover, such officers cannot be permitted to openly defeat the provisions of law and the law as declared by the Supreme Court (supra). In our opinion, in the event, the concerned officials are to adhere to the basic norms and procedure in conducting any proceedings under the tax laws, majority of the litigation would not reach the Court. The law has conferred such powers to protect the interest of the revenue, which needs to be exercised only in a manner as permissible and not arbitrarily”, it said.
The Bench expressed deep concern that officials were knowingly breaching the law and the declarations of the Supreme Court with impunity, thereby taking the rule of law to ransom.
Accordingly, the Court set aside the impugned attachment order, and Joint Commissioner of State Tax, Investigation-A was directed to deposit an amount of Rs. 25,000/- as costs with the Secretary, Maharashtra State Legal Services Authority, High Court premises, Mumbai, within a period of two months.
Cause Title: Nivara Infradevelopers LLP v. The Union of India and Ors. [Neutral Citation: 2026:BHC-OS:9038-DB]
Appearances:
Petitioner: Advocate Ishaan V. Patkar, Advocate Vinit V. Raje, Advocate Sanskar R. Ahire, Advocate Alaksha Legal.
Respondents: Assistant Government Pleader Amar Mishra.