I write the solution here for future reference.
If any expert feels it is a horrible one please let me know.
function unhide_widget( $widget_types ) {
array_splice($widget_types, array_search('custom_html', $widget_types), 1);
return $widget_types;
}
add_filter( 'widget_types_to_hide_from_legacy_widget_block', unhide_widget' );