Court-deposited funds remain insolvency estate assets and must be dealt with under the corporate insolvency process.

Money deposited in court under an interim order and realised through encashment of a bank guarantee remained an asset of the corporate debtor, because the deposit did not transfer title to the award-holder and was to be dealt with as part of the insolvency estate; it was therefore to be released to the Resolution Professional. Although the petitioners had a statutory remedy under the MSMED Act, the writ proceedings could not yield relief once corporate insolvency resolution proceedings had commenced and the IBC moratorium applied, as the claim had to be pursued within the insolvency process.

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Issues: (i) Whether the amount deposited in Court pursuant to the interim order and realised through encashment of the bank guarantee formed an asset of the corporate debtor and was liable to be released to the Resolution Professional under the insolvency process; (ii) Whether the writ petition could be entertained in view of the statutory remedy under the Micro, Small and Medium Enterprises Development Act, 2006 and the effect of the moratorium under the Insolvency and Bankruptcy Code, 2016.

Issue (i): Whether the amount deposited in Court pursuant to the interim order and realised through encashment of the bank guarantee formed an asset of the corporate debtor and was liable to be released to the Resolution Professional under the insolvency process.

Analysis: The amount was deposited to comply with the Court's interim direction requiring deposit of 75% of the awarded amount. The Supreme Court upheld that direction and ordered encashment of the bank guarantee. The deposit was therefore treated as money held in compliance of the Court's order and not as a transfer of title to the award-holder. Once corporate insolvency resolution proceedings had commenced, the corporate debtor's claim to the amount continued, and possession of the amount by the Court did not change its character as an asset of the corporate debtor. The decree-holder's claim was required to be dealt with in the insolvency process as a creditor's claim.

Conclusion: Yes. The deposited amount remained an asset of the corporate debtor and was directed to be released to the Resolution Professional.

Issue (ii): Whether the writ petition could be entertained in view of the statutory remedy under the Micro, Small and Medium Enterprises Development Act, 2006 and the effect of the moratorium under the Insolvency and Bankruptcy Code, 2016.

Analysis: The petitioners had a statutory remedy under Section 19 of the Micro, Small and Medium Enterprises Development Act, 2006, and the challenge to the award included jurisdictional objections capable of being raised before the statutory forum. However, by the time the matter was finally decided, corporate insolvency resolution proceedings had already commenced, a Resolution Professional had been appointed, and the moratorium under the Insolvency and Bankruptcy Code, 2016 applied to continuation of proceedings and execution against the corporate debtor. In that situation, the writ proceedings could not be pursued to obtain release of the amount otherwise forming part of the insolvency estate.

Conclusion: The writ petition could not yield relief to the petitioners, and the amount was to be dealt with in the insolvency process.

Final Conclusion: The challenge to the award did not result in any substantive relief to the petitioners, while the deposited amount was treated as part of the insolvency estate and released for distribution in accordance with the insolvency regime.

Ratio Decidendi: Money deposited in Court pursuant to a pre-insolvency judicial order remains an asset of the corporate debtor, and on commencement of corporate insolvency resolution proceedings it must be dealt with under the insolvency framework rather than as free proceeds of execution in favour of the decree-holder.

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