Muniyappa, a former Indian Open champion, emerged a top contender for the title after his third round effort that moved his total to 14-under-196.
Defending champion Chikkarangappa, who also hails from Bangalore, came up with a 64 to be one shot off the lead in second place.
Lucknow's Sanjay Kumar, the overnight joint leader, dropped to third at 12-under-198 after a 68 today. He mixed an eagle and four birdies with two bogeys and a double-bogey.
Mukesh Kumar of Mhow (MP) posted a 67 to share fourth place with Abhijit at 11-under-199.
Muniyappa (69-66-61) fired a blistering nine-under-61 to shatter the previous course record of 63 that was jointly held by Rashid Khan, Angad Cheema, Md Zamal Hossain Mollah, Ashok Kumar, Rafick Ali Mollah, Karanjit Singh Sandhu and Gurbaaz Mann.
Muniyappa, who began the day tied at sixth place, looked in ominous form from the very outset as he birdied the first and third and followed that up with a chip-in from the bunker for eagle on the fourth.
The 37-year-old continued to march ahead on the back- nine as he converted a 30-footer for birdie on the 17th and picked up three more strokes from a range of seven to 10 feet.
Muniyappa, who won his last title at the 2009 Indian Open, dropped a lone bogey on the 15th.
N Thangaraja of Sri Lanka also made a hole-in-one on the 13th during his round of 72 and ended the day tied 17th at three-under-207.