An alleged match fixer had his assets worth around $550,000 unfrozen after Chief Justice Sundaresh Menon ruled that prosecutors did not do enough to show that the funds should continue to be seized.
The initial seizure had blocked Rajendar Prasad Rai, who was charged in 2015 for allegedly offering bribes to football players to fix the outcome of a league cup match, from accessing three bank accounts.
But under the Criminal Procedure Code, the authorities have to go to court to justify continued seizure after a year has passed.
Last November, the prosecution got an extension of until June 30 from a magistrate to freeze the accounts for the purpose of investigating money laundering offences.
But Rai, 43, went to the High Court to challenge the order, and the Chief Justice decided that the prosecution's evidence had fallen "far short".
"Such a draconian action must be shown to be justifiable," he said, referring to continuing the freezing of the assets.
Rai's lawyer, Senior Counsel N. Sreenivasan, had pointed out that the prosecution did not explain to the magistrate the basis for why the funds still had to be frozen.
Despite this, the magistrate allowed the prosecution's application.
In his written judgment on Monday, the Chief Justice said that the magistrate had erred.
There was no reasonable basis, on the evidence before her, to find that the seized funds were relevant to any of the purposes set out in the law, he explained.
The prosecution did offer to furnish the Chief Justice with more evidence, saying investigations had progressed since the case was before the magistrate.
But the Chief Justice said this was inappropriate. It would "not be just to enable the prosecution to attempt to remedy the flawed proceedings in this way", he said.
Yesterday, prosecutors sought a stay of the Chief Justice's order to unfreeze the accounts to give them time to use another legal regime to do so, but he rejected this.
Rai's match-fixing trial is ongoing.