Madras High Court: In a petition filed under Section 11 of the Contempt of Courts Act, 1971 alleging non-compliance with the directions issued by the Court, wherein the Court, apart from directing the Monitoring Committee to take further steps for refunding the amount to the depositors, also highlighted serious lapses in the implementation of the Tamil Nadu Protection of Interests of Depositors (in Financial Establishments) Act, 1997 (‘TNPID Act’), the Single Judge Bench of B. Pugalendhi, J., taking note of the subsequent developments and the assurance that the system is now undergoing course correction with a strong institutional framework in place, held that the Contempt Petition stands closed, recording the compliance shown. The Court further clarified that any breach or deviation from the Standard Operating Procedure (‘SOP’), or from the timeline now fixed for the issuance of the Government Order, may be brought to its notice for appropriate action.
The Court noted that the TNPID Act was enacted to protect the interests of depositors who fall prey to fraudulent financial establishments. However, the practical implementation of the Act had been undermined by administrative delays, lack of coordination, absence of proactive monitoring or awareness programs, and the non-existence of clear timelines, all of which effectively defeated the very purpose of the legislation. These systemic failures had severely diminished the efficacy of the Act, leaving thousands of poor and middle-class depositors in prolonged distress.
In light of these concerns, the Court had made extensive observations, including strong criticism of the authorities’ failure to take timely action under Sections 3 and 4 of the Act, particularly with respect to the issuance of Government Orders (‘GOs’) for ad-interim attachment. The objective of the earlier order was not only to address the specific case at hand but also to initiate systemic reform and restore public confidence in the process.
The Court further noted that during the course of the contempt proceedings, the Government demonstrated a meaningful response and initiated structural improvements. Following a high-level meeting chaired by the Chief Secretary on 27-06-2025, the Home Department issued a comprehensive SOP on 09-07-2025. This SOP, formalized through G.O Home Department, dated 09-07-2025, brought together all relevant departments under a unified, time-bound procedural framework.
The Court said that one of the principal criticisms in its earlier order was the pervasive delay affecting every stage of action under the TNPID framework, ranging from the registration of complaints, issuance of Government Orders under Section 3, action by Competent Authorities under Section 4, to the auction and disbursal of proceeds. The absence of clearly defined timelines had led to prolonged stagnation, leaving depositors in distress for years.
The Court observed that the newly issued SOP seeks to rectify this structural inaction by prescribing specific and structured timelines for coordination among key departments, including the Economic Offences Wing, Home Department, Revenue Department, and Registration Department. It considered this development a serious step in the right direction, aimed at converting a previously fragmented and ad hoc response into a time-bound and accountable framework.
The Court further noted that a particularly commendable feature of the SOP was its adoption of digital communication and e-governance tools. Instructions can now be issued via email, and revenue and registration records can be retrieved online. The SOP’s conscious move toward digital workflows, such as email-based communication, access to case documents through official websites, and integration with online revenue databases marked a significant departure from the earlier dependence on physical files and manual correspondence. The Court said this modern approach would not only minimize avoidable delays but also enhance transparency, traceability, and institutional accountability.
This Court also noted with appreciation that, vide G.O., Home Department, dated 08-07-2025, the category of “economic offender” has now been included under the Tamil Nadu Act 14 of 1982 (Goondas Act). This legislative amendment empowers the authorities to invoke preventive detention measures against habitual offenders operating fraudulent financial establishments. The Court recognised this as a significant policy shift, one that enhances the Government’s capacity to combat economic offences that disrupt public order and erode investor confidence. This initiative, the Court observed, deserves particular commendation.
In its earlier order, the Court had suggested that the Government consider appointing either a retired High Court Judge or a senior IAS officer as a full-time Competent Authority, with the aim of expediting recovery and refund proceedings and restoring depositor confidence. In response to this suggestion, the Government has now proposed the appointment of zonal-level officers as Additional Competent Authorities, in addition to the existing District Revenue Officers. The Court viewed this move as a step toward decentralisation and a strengthening of the overall enforcement framework under the TNPID regime.
The Court highlighted the proposal to constitute a Valuation Committee chaired by the District Revenue Officers, including representatives from the Registration Department, Public Works Department, and Regional Transport Offices, to assess and approve the value of attached assets prior to auction as per the TNPID Court’s sale orders. The Court observed that this inter-departmental approach is expected to streamline the valuation process, minimize disputes, and expedite auctions.
The Court further highlighted the Government’s proposal to designate the Commissioner of the Social Security Scheme (‘SSS’), Office of the Commissioner of Revenue Administration, as the full-fledged Head of Department under the TNPID Act, responsible for budget control, reconciliation, and supervision. It noted that the absence of a dedicated Head of Department had previously led to institutional ambiguity, and that this administrative gap being addressed deserved due appreciation.
These institutional reforms, the Court highlighted, demonstrate the Government’s constructive response to its earlier observations and a commitment to institutionalize a previously fragmented and unstructured process. While these measures are not the final step in reform, the Court acknowledged them as a significant beginning, offering hope for timely restitution to thousands of depositors long awaiting refunds. The Court emphasised that the administrative framework necessary to fulfill the objectives of the TNPID Act has now been laid, subject to consistent implementation.
However, the Court noted that one issue remains unaddressed. While timelines have been fixed for every other stage, the issuance of the Government Order under Section 3 has not been assigned any fixed outer limit, with the SOP merely stating it should be done “expeditiously.” Given that the Government Order is issued based on only prima facie administrative satisfaction and is subject to confirmation by the Special Court concerned, the Court, to ensure consistency and prevent avoidable delay at this critical stage, fixed a maximum permissible period of 12 days from the receipt of the proposal by the ADGP, Economic Offences Wing (EOW), for issuing such Government Orders. The Court explained that this time limit aligns with comparable procedures under preventive detention laws and is intended solely to provide procedural clarity. It does not curtail the Government’s discretion, as it remains for the Special Court to examine the matter and exercise its own subjective satisfaction when deciding whether to make the order of attachment absolute.
The Court expressed satisfaction that its observations, criticisms, and suggestions in the earlier order have been taken in the right spirit by the Government, which has responded with visible and substantive measures. These are not mere symbolic gestures but represent genuine institutional efforts reflecting constructive engagement with the judiciary’s directions. The progress achieved in prevention, enforcement, coordination, valuation, and administration deserves full recognition and appreciation.
The Court further expressed its appreciation for the Government’s constructive response. Rather than responding defensively to judicial criticism, the State has embraced it as an opportunity for institutional improvement. The issuance of a detailed SOP, adoption of digital mechanisms, initiation of preventive awareness campaigns, and structural reforms, such as the inclusion of “economic offender” under the Goondas Act, appointment of zonal-level Competent Authorities, creation of Valuation Committees, and designation of a dedicated Head of Department, all demonstrate the Government’s serious commitment to the spirit of the Court’s order. Such responsiveness not only reinforces the rule of law but also helps restore public confidence in the efficacy of the system.
The Court said that, in view of the developments and with the assurance that the system is now on a course correction supported by a strong framework, the Contempt Petition is hereby closed, recording the compliance shown. It further clarified that any breach or deviation from the SOP, or from the fixed timeline for issuance of the Government Order, may be brought to the Court’s attention for appropriate action.
[T Prabhakar v. Dheeraj Kumar, Cont.P(MD)No.1157 of 2025, decided on 18-07-2025]
Advocates who appeared in this case:
For Petitioner : Mr.M.Jerin Mathew
For Respondents: Mr.Ajmal Khan, Additional Advocate General Assisted by. Mr.T.Senthil Kumar, Additional Public Prosecutor
