A bench comprising Chief Justice Sanjay Kishan Kaul and Justice T S Sivagnanam gave the direction while recording an undertaking of the Chennai Corporation that it would clear in three months the squatters and also prevent any fresh encroachment.
The stadium hosts events, including Chennai Open -- the lone ATP tournament in South Asia.
Taking a serious note of the failure of officials to check the encroachments, the bench said, "We would like to know who was responsible for permitting such constructions, looking the other way, for which necessary departmental inquiry be held, responsibility fixed and disciplinary proceedings initiated.
The court was passing orders on a PIL by one S A Ahmed, who wanted encroachments on the lands abutting the Tank Bund Road, and adjoining tennis stadium to be removed.
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The petitioner submitted that several international tennis events were conducted at the stadium and alleged that more than 150 illegal structures had been erected on the road leading to the stadium.
The Chennai Corporation informed the court that "some endeavour" had indeed been made in the recent past to provide alternative sites for encroachers identified for relocation.
The bench adjourned the PIL to October 29 for further hearing.