Decided 16 October 2026. The Bombay High Court has quashed the provisional attachment of bank accounts of 1Pay Mobileware, a payment aggregator, ordered by DGGI under section 83 of the CGST Act. The Court held that money in an escrow account is held in trust for merchants and is not the aggregator's property, and that the attachment rested on suspicion, without any material showing a GST liability on the aggregator itself.
Case at a glance
| Case | 1Pay Mobileware Pvt. Ltd. v. Union of India & Ors. (DGGI) |
| Forum | Bombay High Court (Justice M.S. Karnik and Justice Sandesh D. Patil) |
| Case No. | Writ Petition No. 4586 of 2026 |
| Date of judgment | 16 October 2026 |
| Key provision | Section 83 CGST Act (provisional attachment) |
| Result | Provisional attachment of bank accounts quashed |
Facts of the case
The petitioner is a payment aggregator whose platform is used by merchants, including several government entities. DGGI provisionally attached its bank accounts and later partly de-froze them by orders of 4 and 18 September 2026.
In its reply the department alleged that 88 merchants using the platform were non-existent and engaged in online money gaming. It did not disclose who these merchants were or what transactions were involved. The aggregator's own GSTR-1 showed only commission invoices.
Issue before the High Court
Can DGGI provisionally attach the bank accounts, including escrow accounts, of a payment aggregator when the alleged tax evasion is by merchants using its platform?
What the High Court held
- Money in an escrow account is impressed with a trust for the merchants. It is not property of the aggregator and cannot be attached under section 83.
- Following the Delhi High Court in Zhudao Infotech, an aggregator that is not itself liable for tax on the merchants' transactions cannot have its accounts attached to secure liabilities of third parties.
- An attachment order cannot be justified later through an affidavit in reply. The orders did not record any opinion of the Commissioner; they reflected only an inquiry.
- Applying the Supreme Court's tests in Radha Krishan Industries, the power is draconian, must be based on an opinion formed on tangible material and must be necessary to protect revenue. None of this was shown; the attachment was based on suspicion and was illegal.
- The petitioner had offered to cooperate in the investigation relating to the 88 merchants.
Practical takeaways for taxpayers
- A provisional attachment under section 83 must be backed by a recorded opinion based on tangible material. Ask for the reasons and the material.
- Escrow and nodal accounts holding customer or merchant money are not the taxpayer's property; challenge their attachment on that ground.
- Intermediaries such as payment aggregators should keep merchant KYC and transaction data ready to show cooperation without accepting liability for merchants' tax.
Frequently asked questions
Can GST officers attach a bank account during investigation?
Yes, under section 83, but only if the Commissioner forms an opinion on tangible material that attachment is necessary to protect revenue. Courts strictly enforce these conditions.
Can an escrow account be attached for the account holder's GST dues?
The Bombay High Court held that escrow money held in trust for others is not the holder's property and cannot be attached under section 83.
Facing a similar GST dispute?
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This summary is based on the order of the Bombay High Court in Writ Petition No. 4586 of 2026. It is general information, not legal advice; the outcome of any case depends on its own facts and the full text of the order.