TN&Q Bank was established in 1937 with a new Quilon headquarters building which Mathen built at a cost of Rs.1,40,000 (a very large sum of money at that time). To retain the business and deposits of the Travancore State, C. P. Mathen and
K. C. Mammen Mappillai had not only agreed to the headquarters in
Travancore but that two of the bank's directors were the Dewan's appointees and also that the Bank's General Manager, a confidant of the
Deiwan named K. S. Ramanujam, was appointed at the specific recommendation of
Sir C. P. Ramaswamy Iyer. Despite this initial support from the Travancore Government, within a few months of amalgamation being completed, rumors started making its rounds that the bank was insolvent, and by 1938 there was a run on the bank's assets – this was instigated not only by the Diwan but was publicized by the Travancore State's Department of Publicity. The bank's financial run concluded with 88% of the public's deposits being returned by the bank, and the bank becoming insolvent. At this point the trap was sprung, by Sir CP's administration demanding the extradition of Mathen and Mammen Mappillai from
Madras Presidency to Travancore State to stand trial for defrauding the public. Sir CP also convinced the British Government in
Madras that the bank and its directors had been financing the
Indian National Congress and the
Independence movement, so appeals to the Madras High Court and the Privy Council in
London to stay the extradition orders were rejected and 3 directors of the bank including Mathen, Mammen Mappillai and Mammen Mappillai's elder brother and Mammen Mappillai's son, were transported in chains from Madras to
Quilon (now called Kollam]) to stand trial. At the trial in Trivandrum, the erstwhile General Manager of the bank - K. S. Ramanujam, who was the nominee of the Maharaja's government - falsely testified that Mammen Mappillai and Mathen had defrauded the bank and four directors (including Mammen Mappillai's brother and son) were then awarded 8 years' imprisonment. The bank's remaining assets were liquidated by the State, and the bank's assets were distributed - mainly to confidants of Sir C. P. Ramaswamy Iyer, one of whom acquired the bank headquarters' building in Quilon for Rs.15,000 - approximately a tenth of what it had cost to build three years earlier. With the first year in jail, Mammen Mappillai's imprisoned elder brother died a broken man. Soon afterwards, Sir CP, who had been an astute lawyer in the colonial administration, being keenly aware of the weaknesses in the Government's case – which depended on K. S. Ramanujam who vanished abroad after the trial - sent word to Mammen Mappillai and Mathen that if they admitted their accused guilt and sought the Maharaja's mercy they could be pardoned. Mammen Mappillai and his son, had other major family problems, so they agreed to sign the false declaration but Mathen continued to refuse. Sir CP initially declined to agree to the release without all of three of them admitting guilt, but finally released Mammen Mappillai and his son on receiving their written "confessions". Mathen continued to hold out on his refusal to sign any
false confession, despite heavy pressure brought on him through the Inspector General of Police, Abdul Karim, visiting him regularly in jail and suggesting that he sign a letter – which the IG had drafted, requesting the Maharaja to pardon and release him. Finally, on 22 January 1942, C. P. Mathen was unconditionally released by the Maharaja's Government without any written or verbal false admission of guilt. The IG, Abdul Karim, took Mathen in his official car from Travancore jail to his house where his family had waited patiently for his release from jail. ==Political and diplomacy career ==