Dear Sinuka,
Your post is too short. It raises more questions in the mind of reader.
After giving letter of resignation, has employee stopped coming for the duty? After submitting letter of resignation, how many days employee reported for duty? On receipt of his resignation letter, did you issue him "Acceptance of Resignation" letter? If yes, then did you enumerate what would be procedure of handing/taking over?
If employee is possession of "Project code", then you may issue notice to him. "Project code" is supposedly a company property and it was employee's duty to return it. In the notice state clearly that he in possession of company property illegally and if he fails to return it, police complaint will be lodged against him.
Send this notice by "Speed Post with Acknowledgement Due". If the employee remains non-responsive then lodge a police complaint. If the employee approaches you to return the project code, then tell him to do complete knowledge transfer. Once the handing/taking over completes, issue him show cause notice for illegal possession of the project code. If the reply is not satisfactory, order domestic enquiry. If the misconduct is proved during the enquiry, then take a suitable action against the employee which could be termination of the employment also.
I recommend handling this matter with due sensitivity. Warning letters are issued for minor offences. However, this is a far serious matter. Therefore, it merits stringent action but at the same time, you need to follow due process of law as well. Any loophole will help employee to wriggle out. Stringent action will send signal to all other employees on what happens when some employee tries to be oversmart.
Thanks,
Dinesh Divekar