Terming the action by China as "surprising", External Affairs Ministry said it had expected China would have been more understanding of the danger posed to all by terrorism and would join India and others in fighting the common challenge of terrorism.
US Secretary of State Mike Pompeo says China 'protects' violent Islamic terror groups from UN sanctions.
The proposal is the fourth such bid at the UN in the last 10 years to list Azhar as a global terrorist.
India said Lakhvi's release was in violation of the 1267 UN resolution dealing with designated entities and individuals.
Asked whether India offered something to China for Azhar's listing, he asserted that India doesn't negotiate on matters related to national security. "Our objective was to ensure designation of Masood Azhar as global terrorist," he said.
He said the situation was made difficult for the terrorist organisations as a result Jaish chief Maulana Masood Azhar sent his nephews to carry out terror activities.
China has put a hold on a proposal by the United States and India at the United Nations to blacklist Abdul Rauf Azhar, the brother of Jaish-e Mohammed (JEM) chief Masood Azhar and a senior leader of the Pakistan-based terror organisation.
"China's ideology seems to be eliminating terrorism from its country but letting terrorist activities flourish in India," the Sena said.
India believes "terrorism is a major issue for China. They know a number of terror groups are based in Pakistan", sources added.
China on Thursday sought to defend its move to block a proposal by the United States and India at the United Nations to blacklist Pakistan-based Jaish-e-Mohammed (JeM) deputy chief Abdul Rauf Azhar, saying it needs more time to assess the application.
Congress MP Shashi Tharoor on Saturday (local time) highlighted how India responded in a measured and calibrated manner towards terror bases and headquarters in Pakistan, following the dastardly Pahalgam terror attack in which 26 people were killed.
She said China's blocking of India's move in the UN for action against Pakistan over 26/11 plotter, saying it was at "variance" with progress in ties.
"It is the responsibility of all members of the council to make sure that these requirements are followed," Chinese Permanent Representative to the UN said.
The French sources also said that the country will insist on maintaining Pakistan on the 'grey list' of countries at the ongoing meet of the Financial Action Task Force (FATF) in Paris.
"Time has come for Pakistan to decide in its own interests. We will do what's in Pakistan's interests," Qureshi told Geo TV in an interview.
'China has refused to act upon the threat posed by Pakistan using terrorism as an instrument of its foreign policy.' says Rajeev Sharma.
India, which has been at the forefront of the years-long efforts to reform the UNSC, began its two-year tenure at the Council on Friday last.
Almost a year after key 26/11 suspect Ilyas Kashmiri was reported killed in a drone strike, the United Nations has updated his status as "reported dead" in a sanctions list of individuals and entities associated with the Al Qaeda
India has submitted a formal request to the United Nations Committee 1267, seeking inclusion of the name of Jaish-e-Mohammed chief Masood Azhar on the sanctions' list, said government sources.
As India commemorates the 7th anniversary of the 2008 Mumbai attacks, UN chief Ban Ki-moon has said that perpetrators of all terror attacks must be brought to justice.
India has hit out at China for blocking a move to designate Pakistan-based LeT leader Sajid Mir as a "global terrorist" by the UN, saying it shows a lack of genuine political will to fight the scourge of terrorism.
The Chinese technical hold was set to lapse on Monday, and had China not raised further objection, the resolution designating Azhar as a terrorist could stand passed automatically. The hold has been extended for another six months.
He said China understands India's concerns over the issue.
The sanctions list subjected him to a travel ban, assets freeze and an arms embargo.
"We need to have further discussion and conversation so that we can have better understanding and can work closely on it. We are ready to do that," said a Chinese official.
Rauf Azhar, born in 1974 in Pakistan, had been sanctioned by the United States in December 2010.
India has demanded the United Nations to slap sanctions against the new Taliban leader in Afghanistan, saying it is "sheer folly" that the leader of a proscribed entity is not yet designated as a terrorist individual.
The 13th report of the Analytical Support and Sanctions Monitoring Team cites a UN Member State as saying that Jaish-e-Mohammed (JeM), a Deobandi group ideologically closer to the Taliban "maintains eight training camps in Nangarhar, three of which are directly under Taliban control."
Beijing blocked the proposal that had been moved by the US and co-designated by India to blacklist Mir under the 1267 Al Qaeda Sanctions Committee of the UN Security Council as a global terrorist and subject him to assets freeze, travel ban and arms embargo.
Pakistan had submitted the names of Angara Appaji and Gobinda Patnaik for designation under the 1267 Al Qaeda Sanctions Committee of the UN Security Council.
Makki is a US-designated terrorist and brother-in-law of Lashkar-e-Tayiba chief and 26/11 mastermind Hafiz Saeed.
He said there was a tradition in the country to speak in one voice on issues such as external affairs and national security but there has been a departure from it in the last few years.
Early this year the US along with the United Kingdom and France approached the United Nations's sanctions committee for the ban on Azhar.
The sources said Modi's pre-recorded video statement is expected to be broadcast at the UN General Assembly hall in New York around 9 am local time (6.30 pm IST) and added that he is scheduled as the first speaker in the forenoon.
Swaraj took up the issue with Wang at a bilateral meeting in Moscow on the sidelines of the Russia-India-China trilateral meeting of their foreign ministers.
Terror group Al Qaeda is "shaping" its regional affiliate in the Indian subcontinent to spread its operations into Jammu and Kashmir, Bangladesh and Myanmar, according to a UN report.
Geo-political reasons are to be blamed for spike in global oil prices, he says.
Specially designated global terrorist Sirajuddin Haqqani, who carries a reward of $10 million US bounty on his head, is the acting interior minister while his uncle -- Khalil Haqqani -- has been named as acting minister for refugees.
Pakistan in a letter to UN Security Council 1267 Committee has contended that Hafiz Saeed supports a family of four members, as a sole supporter, he is responsible for food, drink and clothes expenses for all family members.
"The fight against impunity is critical to the larger pursuit of securing peace and justice. The Security Council must send an unambiguous and unequivocal message on this count," External Affairs Minister S Jaishankar told the 15-nation UN Security Council briefing on Ukraine 'Fight against impunity'.