Madras High Court directs surplus from ₹4-crore property sale to be shared pro rata among chit-fund depositors

By an order dated 15 December 2025 in C.R.P. No. 6264 of 2025, the Court permitted the revision petitioners to deposit ₹1,70,24,000; upon payment, the attachment was to be raised and the petitioners could obtain a sale deed from the chit company and its directors.

The State and the competent authority sought review, contending that the order did not take account of pending TNPID proceedings and that a sale at that price would prejudice depositors, whose claims exceeded ₹8 crore.

During the review proceedings, the Court recorded that the fifth respondent had settled the revision petitioners’ claim and that a sale certificate had been issued to him; the remaining funds were to be used for pro rata payments to depositors.

The chit company and some creditors then contended that the property could fetch a higher price. A separate contempt petition alleged disobedience of the original order.

1. Whether the Court should modify its earlier order in light of the sale to the fifth respondent and subsequent claims that the property could fetch a higher price.

2. Whether the excess sale proceeds held by the review applicants should be distributed to depositors on a pro rata basis.

3. Whether the contempt petition should remain pending after the Court recorded the sale and issued directions concerning the proceeds.

The review application invoked Order 47 Rules 1 and 2 read with Section 114 of the Code of Civil Procedure, 1908; the contempt petition invoked Section 11 of the Contempt of Courts Act, 1971.

The Court’s reasoning also applied the case-specific principle that, after a sale had been completed and a sale certificate issued, objections seeking a higher price—particularly following earlier acceptance of a lower sale price—did not justify reopening the transaction based merely on oral assurances of a better offer. No precedent was cited.

The Court noted that the chit company and the larger group of creditors had earlier accepted a sale at ₹1,70,24,000, while the fifth respondent had since settled the revision petitioners’ claim and obtained a sale certificate.

In those circumstances, the later contention that the property might fetch ₹5.5 crore, or should be sold by public auction, was not accepted; the Court considered that the completed sale and the earlier position of the objectors outweighed unsupported assurances of a higher price.

It directed that the excess funds held by the review applicants be distributed pro rata to depositors and closed the contempt petition.

It closed the contempt petition and the connected miscellaneous petition, with no order as to costs.