Seized funds are categorized as part of the liquidation estate under the IBC, regardless of current custody status, emphasizing equitable treatment of creditors.

ORDER

1. The present application is filed by the Liquidator of Welworth Software Pvt. Ltd. (“Corporate Debtor”) under Section 60 (5) of the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of NCLT Rules for directions to the Respondents to deposit the amount belonging to the Corporate Debtor into the Liquidation Account.

2. Brief relevant facts of the Application are as follows: -

i. The Corporate Debtor, Welworth Software Private Limited, was admitted to CIRP on 01.02.2022 in the main petition. As no Resolution Plan was received, the Corporate Debtor was ordered to be liquidated vide order dated 30.11.2022 in I.A. No.163/2022, and Mr. Narayana Kamma was appointed as the Liquidator.

ii. A Public Announcement in Form B was issued on 08.01.2023 in “The Hindu” (English) and “Vijayavani” (Kannada), inviting claims in accordance with Regulation 12 of the IBBI (Liquidation Process) Regulations, 2016.

iii. During CIRP, a Transaction Audit was initiated by appointing Dipak Agarwal & Co. CA on 04.04.2022 to examine transactions u/s 43, 45, 46 & 66 of the IBC for the period 01.02.2017 to 31.01.2022.

iv. The erstwhile directors of Corporate Debtor were directed to cooperate and furnish records to enable the conduct of the process in I.A.65/2023. The Transaction Auditor’s report, submitted on 30.11.2023, it was recorded that a cash amount of Rs. 47,98,000/- was seized by the CBI from the premises of the Corporate Debtor on 05.10.2020.

v. The Respondent had filed Crl.P. No.687/2021 before Hon’ble High Court of Karnataka under Section 482 Cr.P.C. seeking release of the amount seized during the CBI raid, stating that the amount belonged to Corporate Debtor.

vi. Based on the said submission, the Hon’ble High Court of Karnataka, by order dated 04.03.2021, directed the CBI to return the amount of Rs. 47,98,000/- to the Respondent, who was then representing the Corporate Debtor. The Liquidator issued a notice dated 11.09.2023 seeking clarification regarding the said amount or deposit of the amount into the Liquidator’s account within 15 days. No response has been received to the said notice as on date. Hence the present application.

3. The Respondent has filed reply to the application on 08.04.2025 stating the follows:

i. The Respondent submits that amount of Rs. 47,98,000/- was seized by the Central Bureau of Investigation (CBI) under memo dated 05.10.2020 from the premises of the Corporate Debtor during a search conducted in connection with Criminal Case No. R.C.10 (A)/2020 registered against Mr. DK Shivakumar.

ii. The Respondent states that subsequent proceedings were pending before the LXXXI Additional City Civil & Sessions Judge (Special Court – CCH-82), Bengaluru, exclusively dealing with criminal cases related to elected Members of Parliament and Members of Legislative Assembly in Karnataka, Bangalore.

iii. The Respondent filed Criminal Petition No. 687/2021 under Section 482 of the Code of Criminal Procedure before the Hon'ble High Court of Karnataka, seeking release of the seized amount of Rs. 47,98,000/- on the ground that the Respondent was the rightful owner thereof and legally entitled to its interim custody.

iv. The Hon'ble High Court of Karnataka, vide order dated 20.01.2021, directed the CBI to release the amount of Rs.47,98,000/- to the Corporate Debtor in accordance with the guidelines issued by the Hon'ble Supreme Court in Sunderbhai Ambalal Desai vs. State of Gujarat, subject to the Respondent executing an indemnity bond for an equivalent amount and providing surety for a like sum to the satisfaction of the tria