Despite the exemplary repression of Palayakkarars in 1799, rebellion broke out again in 1800, this time in a more cohesive and united manner. Although the 1800-1801 rebellion was to be categorized in the British records as the Second Palayakkarar War, it assumed a much broader character than its predecessor. It was directed by a confederacy consisting of Marudu Pandian of Sivaganga, Gopala Nayak of Dindugal, Kerala Verma of Malabar and Krishnappa Nayak and Dhoondaji of Mysore.
The insurrection, which broke out in Coimbatore in June 1800, soon spread to Ramanathapuram and Madurai. By May 1801, it had reached the northern provinces, where Marudu Pandian and Melappan provided the leadership. Oomathurai, the brother of Kattabomman emerged as a key leader. In February 1801, Oomathurai and two hundred men by a cleverly move took control of Panchalamkuruchi Fort.
The fort now re-occupied and reconstructed by rebel forces, Panchalamkuruchi became the centre of the uprising. Three thousand armed men of Madurai and Ramanathapuram, despatched by Marudu Pandian, joined up with the Panchalamkuruchi forces. However, British forces quickly asserted itself. The Palayakkarar forces based at Panchalamkuruchi were crushed. By the orders of the government, the site of the captured fort was ploughed up and sowed with castor oil and salt so that it should never again be inhabited.
The British forces quickly overpowered the remaining insurgents. The Marudu brothers and their sons were put to death. Oomathurai and Sevatiah were beheaded at Panchalamkuruchi on 16 November, 1801. Seventy-three of the principal rebels were sentenced to transportation. So savage and extensive was the death and destruction wrought by the English that the entire region was left in a state of terror.
The suppression of the Palayakkarar rebellions of 1799 and 1800-1801 resulted in the liquidation of the influence of the chieftains. Under the terms of the Karnatac Treaty (31 July, 1801), the British assumed direct control over Tamil Nadu. The Palayakkararr system came to a violent end and the Company introduced the Zamindari settlement in its place.