(Prayer: Contempt Petition is filed under Section 11 of the Contempt Court Act, 1971, to punish the respondents herein for their deliberate disobedience in implementation of the order made by this Court in Crl.O.P.(MD).No.9981 of 2016. dated 01.09.2022.)

1. This Contempt Petition has been laid by the 16th respondent in Crl.O.P. (MD).No.9981 of 2016, alleging wilful disobedience of the order passed by this Court on 01.09.2022 and seeking initiation of contempt proceedings against the respondents herein.

2. The operative portion of the said order, the violation of which is complained of, is found in paragraph No.7 thereof, which reads as follows:

                     “7. Now, on the undertaking given by the prosecution that substantial witnesses can be produced on each hearing dates and trial itself can be completed within a period of six months, this Court directs the trial Court to post this case on a day-to-day basis by considering the sufferings of the depositors. The accused if intends to settle the depositors, they are at liberty to do so on their own and that cannot be a reason for putting spokes in the trial, under Section 5A of the Act. After settling the depositors, petition under Section 5A of the Act can be filed and accused can avail the benefit of compounding. The trial Court to proceed with the trial and complete the trial within a period of six months and report to this Court every month about the progress of the case.”

3. The learned counsel for the petitioner would submit that this Court, while granting liberty to the accused to settle the claims of the depositors, had categorically directed that such liberty shall not be permitted to impede the progress of the trial. It is the grievance of the petitioner that, in utter disregard of the said direction, the trial has remained at a standstill for nearly ten months from May 2025 onwards, with not a single witness being produced or examined, on the pretext that proceedings under Section 5A of the Tamil Nadu Protection of Interests of Depositors (In Financial Establishments) Act, 1997 (hereinafter referred to as “the Act”) were pending. It is in these circumstances that the present petition has come to be filed.

4. At the time of hearing, it was brought to the notice of this Court that the Special Court under the TNPID Act, by its final judgment dated 30.04.2026, has discharged the accused persons, holding that the offences stood compounded under Section 5-A of the Act.

5. The gravamen of the contempt petition is the delay in the conduct of the trial on account of the pendency of the proceedings under Section 5-A of the Act, which provides for compounding of offences. A plain reading of Section 5-A of the Act makes it manifest that, prior to the institution of prosecution, the offence may be compounded by the Competent Authority (R.D.O). himself. However, once the prosecution has been instituted, the Competent Authority may compound the offence only with the prior permission of the Special Court and only upon payment of the entire amount due to the depositors, with or without interest. Upon such compounding, the criminal proceedings shall not be continued against the offenders. It is significant to note that the payment of the entire amount due to the depositors is a condition precedent for compounding, and without its fulfilment, no compounding can be effected.

6. In paragraph No.8 of its final judgment dated 30.04.2026, the Special Court has referred to its communication dated 20.09.2025, whereby permission was accorded to the Competent Authority to compound the offence. Reference is also made therein to a further proceeding of the Special Court dated 24.04.2026, relating to 291 depositors, involving a total default liability of Rs.2,29,69,591/-.

7. A perusal of the communication of the Special Court dated 20.09.2025 discloses that the Competent Authority was permitted to proceed under Section 5-A of the Act so as to safeguard the interests of the depositors, and that the Registry was directed to forward the list of depositors to the Advocate Commissioners, the Investigating Agency, the Special Public Prosecutor and the accused through their respective e-mail addresses. The subsequent communication dated 24.04.2026 accords permission to compound the claims of 291 unsettled depositors.

8. Pursuant to the permission granted by the Special Court on 20.09.2025, the Competent Authority, by his letter dated 23.09.2025, had specifically informed the Special Court that the total liability of the defaulting company towards 2992 depositors stood at Rs.13,87,80,171/-, as against which only a sum of Rs.10,80,39,015/- was available with the Authority. The Competent Authority had, therefore, made it clear that the compounding proceedings under Section 5-A of the Act could be initiated only upon the defaulting company, depositing the balance sum of Rs.3,11,41,156/-. Strangely, the Special Court, without adverting to the said communication dated 23.09.2025 and without even making a reference to it, has proceeded to compound the offences and discharged all the accused persons. The relevant portion of paragraph No.5 of the said judgment is extracted hereunder:

                     “5.On perusal of the entire records, it is evident that the law was set in motion by registering the FIR on 06.05.2010 and the properties of the accused were attached and they were brought under surveillance for the proceedings under Sec.3 of the Act. The accused submitted that all their properties of them were attached in accordance with this case and they are starving for their livelihood. It is not the case of the prosecution, except the attached properties, the accused are in possession of any other properties in their hands. The content of “ entire amount” mentioned in Sec.5(A) of the Act covering the sale proceeds of the properties attached under Sec.3 & 8 of the Act. After attaching the properties of the accused, expecting them to remit the entire amount as mentioned in Sec.5(A) of the Act is against the significance of Natural Justice. Hence, the sale proceeds in the account of the competent authority is the money of the accused and the said amount can be subjected for the proceedings under Sec.5(A) of the Act. The proceedings under Section 5(A) of the Act is higher degree status than the proceedings under Sec.7(8) of the Act. The special character of the statute is that it having the compounding nature. Once the offence in concern with one depositor is compounded, the charge in concern with one count would be disposed off........”

9. It is evident from the said judgment that the Special Court, notwithstanding the specific objection raised by the Competent Authority in his proceedings dated 23.09.2025, has proceeded to compound the offences even in the absence of payment of the entire amount due to the depositors. In doing so, the Special Court has construed the expression “entire amount” occurring in Section 5-A of the Act to mean only the sale proceeds of the properties already attached under Sections 3 and 8 of the Act, and has gone to the extent of holding that calling upon the accused to pay the balance amount would offend the principles of natural justice. Consequently, the accused were never called upon to pay the shortfall.

10. Further, the Competent Authority has filed a status report dated 23.06.2026 before this Court, paragraph No.11 of which reads as follows:

                     “11.I respectfully submitted that we had filed Sec.7(8) of TNPID Act before the TNPID Court, Madurai on 08.04.2025 and it is taken into the file in I.A.No.36 of 2025 in the meantime the accused had filed a petition U/s.5 of TNPID Act to compound the offences which is forwarded to our office for necessary action. We had forwarded 5(A) application to the Hon'ble Special Court to issue appropriate order regarding the petition. Further, while the petition is pending U/s.7(8) of TNPID Act, the Special Court have not considered, instead of them the Special Court had passed an order U/s.5(A) of TNPID Act to settle the available amount to the depositors.”

11. The scheme of Section 5-A of the Act is unambiguous. It is the Competent Authority alone who is empowered to compound the offence, and that too only after obtaining the permission of the Special Court and upon payment of the entire amount due to the depositors, with or without interest. Admittedly, in the case on hand, the Competent Authority has not passed any order compounding the offence. On the contrary, the Competent Authority has categorically stated that the entire amount due to the depositors has not been deposited with it. Despite the same, the Special Court, by its judgment dated 30.04.2026, has proceeded to declare that the offences stood compounded and has discharged the accused persons. The manner in which the said judgment has been rendered gives rise to serious doubts. Therefore, the Registry is directed to place this matter before the Registrar (Vigilance), Madras High Court, Madras for taking appropriate action.

12. With the above observations, this Contempt Petition stands closed. There shall be no order as to costs.