The Karnataka High Court has reaffirmed a foundational principle of public law: a shareholder cannot invoke the extraordinary writ jurisdiction of the High Court under Article 226 to challenge state authorities' decisions regarding public land allotments, absent a direct, legally recognized injury. This judgment clarifies the boundary between private commercial disputes and public law remedies, reinforcing that mere economic interest or speculative claim over corporate assets does not confer standing to question administrative actions.
Background & Facts
The Dispute
The petitioners, Tejraj Gulecha and Reddy Veeranna, are individuals who claim to have acquired a 50% shareholding in Embassy East Business Park Private Limited (Respondent No. 2) through a private transaction in 2004. They allege that the company, which was granted 78 acres of public land by the Karnataka Industrial Areas Development Board (KIADB) under a lease-cum-sale agreement dated 07.06.2007, has repeatedly violated the terms of that agreement by creating multiple charges on the property without KIADB’s consent. The petitioners contend that these violations constitute misuse of public land and seek judicial intervention to compel KIADB to act.
Procedural History
The case has undergone multiple iterations before the Karnataka High Court:
- 2021: Petitioners filed Writ Petitions No. 18952 and 18986 of 2021, seeking a writ of mandamus directing KIADB to initiate action under Sections 34 and 38 of the KIAD Act for breach of the lease agreement.
- 16.05.2023: A Single Judge held that petitioners had locus to challenge KIADB’s inaction and directed KIADB to initiate proceedings, allowing petitioners to participate.
- 26.07.2023: The Division Bench modified this order, holding that petitioners had no necessity to participate in KIADB’s inquiry and directed KIADB to conclude its enquiry within four months, without being influenced by the Single Judge’s observations.
- 03.09.2024: KIADB issued an order under Section 34-B(3) extending the project implementation timeline by two years, citing the allottee’s undertaking to use borrowed funds solely for development.
- 30.10.2024: A coordinate Bench dismissed Writ Petitions No. 25857 and 25851 of 2024, holding that petitioners lacked locus to challenge the extension order, as their interest was purely as shareholders and not as aggrieved parties under Article 226.
- 07.02.2025: KIADB permitted Respondent No. 2 to sub-lease 25 acres of the land to Respondent No. 3, Lam Research (India) Private Limited.
- 2025: The present petitions were filed challenging this sub-lease permission and the earlier extension order.
Relief Sought
The petitioners sought:
- Quashing of KIADB’s letter dated 07.02.2025 permitting sub-lease;
- Quashing of the registered sub-lease deed dated 20.03.2025;
- A writ of mandamus directing KIADB to initiate action under Sections 34 and 38 of the KIAD Act against Respondent No. 2 for breach of the lease agreement.
The Legal Issue
The central question was whether shareholders of a company, who are not direct parties to a public land allotment agreement, possess locus standi under Article 226 of the Constitution to challenge administrative decisions made by a statutory body regarding the use of that land, where their alleged grievance arises solely from a private commercial dispute over equity ownership.
Arguments Presented
For the Petitioner
The petitioners argued that their interest in the company’s assets, particularly the 78-acre land, was substantial and protected by the lease-cum-sale agreement’s terms. They contended that KIADB’s failure to enforce its own conditions and its subsequent extension of timelines and permission for sub-lease amounted to complicity in the misuse of public property. They relied on precedents holding that courts may entertain petitions by non-parties where public interest is involved and state inaction is evident. They asserted that the doctrine of public trust and principle of accountability required judicial intervention to prevent alienation of public land.
For the Respondent
The respondents, particularly Respondent No. 2 and KIADB, countered that the petitioners’ interest was purely as private shareholders in a corporate entity. They emphasized that a company is a distinct juristic person, and shareholders have no proprietary right over its assets, as held in Bacha F. Guzdar v. Commissioner of Income Tax. They argued that the petitioners’ true motive was to exert pressure in an ongoing commercial suit (O.S. No. 234/2022) over shareholding rights, and that invoking Article 226 to settle private disputes was an abuse of process. KIADB also submitted that it had conducted a lawful inquiry and acted within its statutory powers under the KIAD Act.
The Court's Analysis
The Court undertook a rigorous analysis of locus standi, grounded in constitutional jurisprudence and binding precedents. It acknowledged the gravity of the allegations against Respondent No. 2 - including creation of multiple charges on public land without KIADB’s consent - but held that these allegations, however serious, did not transform the petitioners’ private commercial interest into a public law right.
The Court emphasized that the Division Bench’s order dated 26.07.2023 had already negated the petitioners’ locus in the earlier round of litigation. The coordinate Bench’s subsequent judgment dated 30.10.2024, which dismissed identical claims on the ground of lack of locus, was binding under the doctrine of judicial discipline. As the Court observed, “a coordinate Bench judgment is binding on subsequent benches of equal or lesser strength.”
The Court cited Dr. Shah Faesal v. Union of India to underscore that conflicting precedents cannot be reconciled by a single Bench; only a larger Bench may overrule a prior decision. The petitioners’ reliance on cases involving public interest litigation or third-party standing was rejected, as those exceptions apply only where the petitioner has a genuine, substantial, and legally enforceable interest distinct from mere economic exposure.
"The rights of the shareholders in the company does not amount to more than a right to participate in the profits of the company and that it does not stretch to having any share in the property of the company."
The Court further noted that the petitioners had already initiated a commercial suit seeking declaration of their shareholding and injunction against creation of charges - a remedy that was both adequate and appropriate. Invoking Article 226 to circumvent this forum was deemed an abuse of process.
The Court also rejected the argument that KIADB’s inaction created a public interest justifying intervention. While public land misuse is a serious concern, the Court held that the remedy lies with the statutory authority, not with private shareholders acting as self-appointed watchdogs. The Board had already conducted an inquiry, granted an extension subject to conditions, and was under no obligation to permit shareholder participation in its quasi-judicial proceedings.
The Verdict
The petitioners lost. The Court held that they lacked locus standi under Article 226 to challenge KIADB’s administrative decisions concerning the allotment and sub-lease of public land. The petitions were dismissed on the threshold ground of non-maintainability, without adjudication on the merits. The Court affirmed that shareholder interest in corporate assets does not confer standing to invoke constitutional writ jurisdiction against state authorities.
What This Means For Similar Cases
Shareholder Interest Is Not Locus Standi
- Practitioners must advise clients that mere equity ownership in a company does not confer standing to challenge state decisions affecting corporate property.
- Writ petitions filed by shareholders to protect corporate assets will be dismissed unless they can demonstrate a direct, personal, and legally enforceable right violated by the state action.
- In cases involving public land, only those with statutory rights, lessees, or affected communities may invoke Article 226.
Public Law Remedies Cannot Substitute Civil Litigation
- Private commercial disputes, even those involving allegations of fraud or misuse, must be resolved through civil courts or arbitration.
- Courts will not entertain writ petitions under the guise of public interest when the real grievance is a private contractual or shareholding dispute.
- Practitioners should avoid filing Article 226 petitions as litigation tactics to pressure counterparties in ongoing civil suits.
Statutory Authorities Must Be Given First Opportunity
- When a statutory body like KIADB has initiated proceedings under its own Act, courts will defer to its quasi-judicial process.
- Petitioners must exhaust statutory remedies before approaching the High Court.
- Courts will not interfere with administrative decisions unless they are patently illegal, mala fide, or procedurally ultra vires - not merely inconvenient to private parties.
