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New Delhi had abstained during voting at the UNHRC in 2015 on a resolution related to violence in Gaza which was seen as a significant move in Israel and attributed by many to the emerging strong chemistry between Modi and Netanyahu.
Rahul Gandhi, while addressing a press conference at the party headquarters, said Modi insulted the Army by saying UPA's surgical strikes were video games.
A UNSC designation will subject Azhar to an assets freeze, travel ban and an arms embargo.
A known fugitive, Azhar, who formed the JeM in 2000, was branded the brain behind various suicide strikes in India.
China put a technical hold in March on a fresh proposal to impose a ban on the head of Pakistan-based JeM which claimed responsibility for the deadly Pulwama terror attack.
China on Wednesday dismissed reports that the US, UK and France have served it an ultimatum until April 23.
Chinese Foreign Ministry spokesman Geng Shuang told a media briefing that Washington move only complicates the issue.
In New Delhi, the External Affairs Ministry expressed disappointment over the outcome.
China, which is one of the five veto-wielding members of the Security Council, blocked India's efforts in the past to list Azhar as a global terrorist, saying there is not enough evidence against him.
Saeed was banned on December 10, 2008, by the United Nations Security Council after the horrific Mumbai attacks in which 166 people were killed.