Listing out various petitions filed by her government, she said despite directions by the Supreme Court and Cauvery Monitoring Committee (CMC), Karnataka had not released water in "appropriate way", following which the crops have been "largely affected".
Besides, hydro power generation had also been affected, she said in an official statement in Chennai.
"Considering the adamant approach of Karnataka in not releasing due share of water to Tamil Nadu in line with existing Tribunal verdict, which has been recorded by the CMC, I have directed (officials) to file an original suit claiming damages from Karnataka to compensate the damages suffered by Tamil Nadu" regarding crop-loss, she said.
Jayalalithaa said that a high-level panel appointed under Finance Minister O Panneerselvam to assess the situation in the Cauvery delta districts in the wake of the crisis, will submit its report soon following which her government will take appropriate action, she said.
Complying with a Supreme Court order in December, Karnataka had released water for some days but stopped it citing depleted storage of water in its reservoirs.
Tamil Nadu has also been piling pressure on the Centre to notify the final award of the Cauvery Water Dispute Tribunal given in February 2007 but Karnataka has opposed it citing pendency of petitions challenging the award in the Supreme Court.