The makers of Demonte Colony 3 had initially announced a September 11 release before bringing it forward to September 10. Recently, it was reported that the film was being planned for an October 1 release, though there had been no official confirmation of that change at the time. However, the film's release postponement was confirmed by then.

The film has now hit an unexpected roadblock, with the Madras High Court granting an interim stay on the release of Arulnithi-starrer Demonte Colony 3. The order came after A Vijaya Subramanian, authorised signatory of White Nights Entertainments, approached the court over an alleged dispute concerning the production, marketing and distribution rights of the film and the franchise.

According to the petition, Subramanian and director Ajay Gnanamuthu had entered into a partnership deed in January 2023 covering the production, marketing and distribution of feature films, including future instalments of the Demonte Colony franchise. The petitioner claimed that after the success of Demonte Colony 2, the two parties had agreed to produce the third instalment under the arrangement.

The petition further alleged that Gnanamuthu subsequently joined hands with Passion Studios and conducted a pooja for the film without informing White Nights Entertainments. Subramanian claimed that he was initially told Passion Studios' involvement was limited to technical and logistical assistance and that he would continue as joint producer, with his production house receiving credit and a share of the profits. These are allegations made in the petition and have not been adjudicated.

The petitioner also alleged that the film's CBFC application was subsequently made without his knowledge and that his name and production house were not included in the film's promotional material and title cards. The CBFC's official database records the film as certified on July 14, 2026, with Sudhan Sundaram of Passion Film Factory listed as the producer and applicant.

Subramanian sought an interim injunction preventing the film from being released, exhibited or commercially exploited in theatres, on OTT platforms or through other media until the dispute was resolved through arbitration. Justice K Kumaresh Babu granted the interim stay and directed Ajay Gnanamuthu to file his response within four weeks.

The development comes after a lengthy production journey for the third part. Ajay Gnanamuthu returned to write and direct the film, while Arulnithi and Priya Bhavani Shankar reprised their roles. The film's teaser introduced a mysterious librarian, played by Guru Somasundaram, and a book connected to the supernatural events at the centre of the story.

The film was produced by Sudhan Sundaram under Passion Studios, with Manish Singhal and Durgaram Choudhary also producing, and RC Rajkumar, Akshat Singhal and Mohit Singhal serving as co-producers. Sam CS has composed the music, with Sivakumar Vijayan as cinematographer and Kumaresh D as editor.