Availability of mobile and hand-held imaging devices, such as, cell phones, PDA’s, still and video cameras have resulted in new applications, where the text present in the acquired images is extracted and interpreted for various purposes. In this paper, we present a new algorithm for automatic detection of text in color images. Proposed system involves Gabor function based multi-channel filtering on the intensity component of the image along with Graph-Theoretical clustering applied on the color space of the same image, there-by utilizing the advantages of texture analysis as well as those of connected component for text detection. Our approach performs well on images with complex background.