The submission was made before a bench of Chief Justice G Rohini and Justice Sangita Dhingra Sehgal, which was hearing the plea to frame guidelines that if Sahitya Akademi awardees return their awards, they should also return the prize money and royalties they may have earned through sale of their books.
The government's counsel also contended that they have not returned the award money.
The Centre's response came in the backdrop of the court's desire to see the records showing the number of awardees who have returned their award in wake of the protest.
The court was hearing a public interest litigation (PIL), filed by advocate Haji Mohammad Majid Qureshi and a religious organisation which have said that "the present system whereby writers are allowed to retain royalties earned by them through sale of copies of their books despite returning the award is arbitrary and illogical".
It has also said that the plea was to ensure that strong punitive action is taken against those who return such awards as Sahitya Akademi Puraskar which is a solemn token of appreciation conferred on deserving writers on behalf of Indian public.