Court deposit by corporate debtor remains insolvency estate asset and must be dealt with through the resolution process.

Money deposited in court by a corporate debtor under a pre-insolvency interim order, including money realised through encashment of a bank guarantee, remained part of the corporate debtor's assets and did not pass to the decree-holder or claimant merely because the court held it in custody. On commencement of the corporate insolvency resolution process, the moratorium and the vesting of management in the Resolution Professional required that the deposit be dealt with under the Insolvency and Bankruptcy Code. The claimant's remedy was to pursue its claim as a creditor in the insolvency process, and the deposited amount was to be released to the Resolution Professional for distribution in accordance with that regime.

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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 under the insolvency process or belonged to respondent no. 3. (ii) Whether the deposited amount was liable to be released to the Resolution Professional for distribution in accordance with 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 under the insolvency process or belonged to respondent no. 3.

Analysis: The deposit was directed by the Court as a condition for interim protection in the writ proceedings, and the Supreme Court upheld that direction and ordered encashment of the bank guarantee to secure compliance with the deposit requirement. The amount therefore retained the character of a deposit made by the corporate debtor in compliance with a court order. The commencement of corporate insolvency resolution process did not alter that character merely because the money remained in the Court's custody. A decree holder who has lodged its claim in the insolvency proceedings remains a creditor, but does not acquire title to such deposit merely by reason of the award.

Conclusion: The deposited amount was an asset of the corporate debtor and not the property of respondent no. 3.

Issue (ii): Whether the deposited amount was liable to be released to the Resolution Professional for distribution in accordance with the Insolvency and Bankruptcy Code, 2016.

Analysis: Once corporate insolvency resolution process commenced, the moratorium under the insolvency law prohibited continuation of proceedings against the corporate debtor, and the management of its affairs vested in the Resolution Professional. Since the amount constituted an asset of the corporate debtor, control over it had to follow the insolvency regime. The claim of respondent no. 3 was to be dealt with in the insolvency process in the status of a creditor, rather than by direct withdrawal of the deposit outside the statutory framework.

Conclusion: The amount was directed to be released to the Resolution Professional for handling in accordance with the insolvency process.

Final Conclusion: The writ petition and connected matters were finally disposed of with the deposited amount treated as part of the corporate debtor's assets and made available to the Resolution Professional, while respondent no. 3's independent claim to immediate withdrawal was rejected.

Ratio Decidendi: Money deposited in Court by a corporate debtor pursuant to a pre-insolvency court order remains an asset of the corporate debtor and must be dealt with under the insolvency regime, even if held by the Court or realised through encashment of a bank guarantee.

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