Prosecutors said illegal commissions were paid on the Bofors guns
An Italian businessman named in an arms bribery case has withdrawn all funds from his British bank accounts, the Indian government says.
Ottavio Quattrocchi withdrew the money after the accounts were unfrozen, the government told the Supreme Court.
The move came after India said it could not establish Mr Quattrocchi had taken illegal payments. He denies wrongdoing.
Swedish firm AB Bofors was alleged to have paid $1.3bn in bribes over the sale of 400 howitzers to India in 1986.
Indian additional solicitor general, Gopal Subramaniam, told the Supreme Court that the UK Crown Prosecution Service had asked the Indian government if there were any links between the amounts lying in the two accounts and the alleged crime.
The Indian government told the CPS it could not prove a link between the accounts and the alleged Bofors pay-offs.
The Supreme Court sought an explanation after the accounts were unfrozen earlier this month, saying it wanted to know why it had not been kept informed.
Mr Quattrocchi is still wanted in India in connection with the case and federal police say they are still seeking to extradite and try him.
The Indian authorities say Mr Quattrocchi was the intermediary in the deal, and received $7m in bribes and other illegal payments.
Mr Quattrocchi says he is innocent, and is the victim of a political vendetta in India because of his links to the Gandhi family.
The move to unlock the accounts, which media reports say contained $4m, has led to political uproar in India.
The opposition BJP demanded the resignation of the country's law minister.
The Bofors arms case has been one of India's most high-profile and longest-running corruption cases, lasting for nearly 15 years.
It led to the election defeat of former prime minister Rajiv Gandhi in 1989, two years before he was assassinated.
In 2004, Mr Gandhi was posthumously cleared of any wrongdoing in the deal, which was signed when he was in office.
Last May three of the billionaire Hinduja brothers were acquitted in the case.
The Delhi High Court threw out all charges against Britons Srichand and Gopichand Hinduja and Swiss citizen Prakash Hinduja for lack of evidence.