How old debt defaults came to haunt an ex-Minister in a corruption case many years later

Nowadays a lower CIBIL score can ruin your loan application. In the pre-database era, loan defaults did not appear next to your name on a computer screen. But as this case shows, such a poor debt clearing track record had the potential to haunt defaulters for years to come.

In 1973, K. Ponnusamy was working as a Lecturer at the Government College of Arts in Tamil Nadu. He took a crop loan of ₹13,000 from the Reserve Bank of India but was unable to repay the loan. The bank applied to the court and collected the amount.

Madras HC orders release of seized properties of former Minister K. Ponnusamy

Later, in 1985, he borrowed ₹5,000 from his colleague R. Palanivelu after getting him to sign a promissory note. He also defaulted on this loan. The lender had to file a lawsuit against which the decree was issued. Even then the money was not refunded. Eventually the decree amount was collected from his salary.

In later years Mr. Ponnusamy’s personal fortune was on the rise. He had become a familiar figure in Tamil Nadu when he was elected to the Assembly on the AIADMK ticket from Marungapuri constituency in 1991. With the wave of sympathy triggered by the assassination of former Prime Minister Rajiv Gandhi, J. Jayalalitha (as her name was spelled then) became the youngest Chief Minister of Tamil Nadu. On July 3, he appointed Mr. Ponnusamy as Deputy Speaker of the Assembly. Two years later, on 17 May, he brought her into his Cabinet and allocated her the Education portfolio. He held the post until May 9, 1996, when the AIADMK was ousted from power following a strong anti-corruption wave.

The new M. Karunanidhi government registered corruption cases against Jayalalithaa, her confidante Sasikala Natarajan (now VK Sasikala), former Ministers and others. Three Special Courts have also been set up in Chennai to try the accused.

That’s when Mr. Ponnusamy’s troubles started. The Directorate of Vigilance and Anti-Corruption has registered a case against him, his wife Prabavathy, daughter Mala, nephew Venkatesan, brother K. Rajappa and auditor V. Jayaraman. The agency accused Mr. Ponnusamy of amassing wealth to the tune of ₹77.49 lakh during his tenure as Minister, disproportionate to his known sources of income. The movable and immovable properties were acquired in the name of his wife and daughter. Mrs. Prabavathy was a housewife who earned a small agricultural income. His daughter was still a student.

The former Minister claimed that he was earning income from the properties.

During the hearing in the Special Court II, the prosecution wanted to establish that Mr. Ponnusamy was not in good financial condition until he became the Minister of Education. For this, the prosecution investigated his background and presented evidence that he had defaulted on crop loans and personal debts. His colleague, Mr. Palanivelu, appeared in court as a prosecution witness and testified about the difficulties he faced in recovering ₹5,000 from the former Minister.

This was a turning point in the case, eventually leading to Mr. Ponnusamy’s conviction in August 2000, more than a quarter of a century after he first defaulted on repaying a loan.

In his judgment, Justice V. Radhakrishnan noted: “Mr. Ponnusamy’s financial position was not solid until he became the Education Minister. Apparently, he had to borrow money to do both.” [sic] expired, he could not pay the loans, and enforcement proceedings had to be initiated against him for the collection of the loans by the creditors. Even though he was the Deputy Speaker of the Assembly and an MLA, he was not in a position to pay his debts. Therefore, the story that he earned too much income from the lands is unacceptable.”

The former Minister had also taken the plea that the properties were acquired through funds given by Mr. Venkatesan “out of love and affection” to his sister and niece (i.e., Ms. Prabavathy and Ms. Mala).

K. Ponnusamy handed over the South Asian Federation Games (SAF) flag and torch he received from Dhaka to former Tamil Nadu Chief Minister Dr. at the Secretariat in Madras on 31 December 1993. He hands it over to J. Jayalalitha. File. Photo: Special arrangement

But the judge rejected this theory as incredible. The court noted that Mr. Ponnusamy had not provided any acceptable explanation for the assets held in the name of his wife, daughter, brother and Mr. Venkatesan. The conduct and circumstances of the four defendants “infallibly and clearly demonstrated” that material resources were obtained on their behalf solely by utilizing Mr Ponnusamy’s “incalculable” funds. “These accused were merely name givers or benamidars,” the report said.

The judge then sentenced the former Minister to three years rigorous imprisonment (RI) and a fine of ₹ 1 lakh. While the court acquitted the auditor due to lack of evidence, it imposed one year RI and imposed a fine of ₹10,000 on each of the four other accused found guilty.

All five challenged their convictions in the Madras High Court. In April 2001, the Supreme Court upheld only Mr. Ponnusamy’s conviction while acquitting his family members. The court said there was no evidence that they deliberately assisted Mr Ponnusamy in committing the offence. Moreover, there was no evidence to show that his wife and daughter knew that the ill-gotten money was being used to purchase property in their names.

Mr. Ponnusamy then approached the Supreme Court seeking relief. The bench of Justices SN Vairava and KT Thomas dismissed his petition in July 2001: “Both the trial court and the High Court were right in convicting the appellant.”

Thus, Mr. Ponnusamy became the first former Minister of Tamil Nadu to be convicted and sentenced by the country’s highest court in a corruption case.

Footnote: The case is not over yet. It took an interesting turn in March 2019. Passing the orders on the objection of Mr. Prabavavathy and Ms. Mala, the Madras High Court directed the State government to release properties worth ₹77.49 lakh and seized 1,000 grams of gold ornaments as they were acquitted in the case. Even more interesting was that the decision was accepted even though the two women were not represented personally or through their lawyers on appeal.

It was published – 03 December 2025 05:30 IST