In February 1920, when all the prisoners of Mainpuri Conspiracy Case were released under government proclamation, Bismil returned to his native place Shahjahanpur and met the District Authorities. They allowed Bismil to live peacefully after taking an affidavit of undertaking from him declaring therein not to participate in any such revolutionary activity.
Soon, he joined Bharat Silk Manufacturing Co. as a manager for sometimes and after that started a business of silk sarees in the partnership of Banarsi Lal. Banarsi Lal and Bismil had been associated with the District Congress Committee of Shahjahanpur. Although Bismil earned good money in the business yet he was not satisfied because his earlier commitment to get out British rulers from India was not fulfilled.
In 1921 Bismil attended Ahmedabad Congress along with many volunteers from Shahjahanpur and occupied a place on the dias. A senior congressman Prem Krishna Khanna and revolutionary Ashfaqulla Khan were also with him. Bismil played an active role in the Congress with Maulana Hasrat Mohani and got the most debated proposal of Poorna Swaraj passed in the General Body meeting of Congress. Mr. M K Gandhi, who was not in the favour of this proposal, became quite helpless before the overwhelming demand of youths. It was another victory of Bismil against the Liberal Group of Congress. He returned to Shahjahanpur and mobilized the youths of United Province for non-cooperation with the Government. The people of U.P. were so much influenced by the furious speeches and verses of Bismil that they became hostile against British Raj.
In February 1922 some agitating farmers were killed in Chauri Chaura by the police. The police station of Chauri Chaura was attacked by the people and 22 policemen were burnt alive. Gandhi declared an immediate stop the non-cooperation movement without consulting any executive committee member of the Congress. Bismil and his group of youths strongly opposed Gandhi in the Gaya session of Indian National Congress (1922). When Gandhi refused to rescind his decision, its existing president Chittranjan Das resigned and the Indian National Congress was divided into two groups - one liberal and the other for rebellion. In January 1923, the rebellious group formed a new Swaraj Party under the joint leadership of Pt. Moti Lal Nehru and Chittranjan Das, and the youth group formed a revolutionary party under the leadership of Bismil.
With the consent of Lala Har Dayal, Bismil went to Allahabad where he drafted the constitution of the party in 1923 with the help of Sachindra Nath Sanyal and another revolutionary of Bengal, Dr. Jadugopal Mukherjee. The basic name and aims of the organisation were typed on a Yellow Paper and later on a subsequent Constitutional Committee Meeting was conducted on 3 October 1924 at Kanpur in U.P. under the Chairmanship of Sachindra Nath Sanyal.
This meeting decided the name of the party would be the Hindustan Republican Association (HRA). After a long discussion from others, Bismil was declared the District Organiser of Shahjahanpur and Chief of Arms Division. An additional responsibility of Provincial Organiser of United Province (Agra and Oudh) was also entrusted to him. Sachindra Nath Sanyal, was anonymously nominated as National Organiser and another senior member Jogesh Chandra Chatterjee, was given the responsibility of Coordinator, Anushilan Samiti. After attending the meeting in Kanpur, both Sanyal and Chatterjee left the U.P. and proceeded to Bengal for further extension of the organisation.
A pamphlet titled "The Revolutionary" was published in January 1925 under a fictitious name, Vijay Kumar and was circulated all over India. It was a pamphlet of four pages wherein the programme or manifesto of the revolutionaries was declared with a promise to Indian public for equal opportunity to every man irrespective of social status high or low, rich or poor. Policies of Mohandas Gandhi were openly criticised and youths were called to join the organisation. The police were astonished to see the language of pamphlet and sought its leader in Bengal. Sachindra Nath Sanyal had gone to despatch this pamphlet in a bulk and was arrested in Bankura, West Bengal. Before Sanyal's arrest Jogesh Chandra Chatterjee had also gone in the hands of police at Howrah railway station of Calcutta in Bengal.