Shareholders Aren’t Owners of Company Property: Karnataka High Court Denies Locus to Challenge KIADB Sub-Lease by Former Investors

“The Petitioners Are Not the Allottees, They Are Not the Lessor, And They Are Not the Aggrieved – They Have No Enforceable Right Against KIADB” – Justice M. Nagaprasanna

In a notable judgment Karnataka High Court, exercising writ jurisdiction under Articles 226 and 227 of the Constitution, dismissed two writ petitions filed by individuals claiming to be 50% shareholders of a company that was allotted public industrial land by the Karnataka Industrial Areas Development Board (KIADB). The petitioners had sought to challenge KIADB’s approval of a sub-lease of 25 acres of the land to a third party for a high-value infrastructure project.

Relying on settled principles of locus standi, company law, and judicial discipline, the Court held that shareholders do not possess any proprietary interest in the assets of a company, and thus cannot invoke public law remedies under Article 226 to settle private commercial disputes or pursue inchoate interests.

The petitions—W.P. Nos. 25744 and 25894 of 2025—were dismissed at the threshold on the ground of lack of locus standi, reaffirming the binding nature of coordinate bench rulings and reinforcing the constitutional bar on turning writ jurisdiction into a tool for shareholder activism or corporate vendetta.

“Writ Courts Are Not Platforms to Settle Business Scores” – Private Disputes Cannot Be Cloaked in the Garb of Public Law

The Court was considering a challenge to KIADB’s permission dated 07.02.2025 granted to Embassy East Business Park Pvt. Ltd. (the 2nd respondent) to sub-lease 25 acres of industrial land to Lam Research India Pvt. Ltd. (the 3rd respondent) for a consideration of ₹1,125 crore. The petitioners claimed to be aggrieved as alleged investors in the company since 2004, asserting that they had paid ₹9.25 crore for a 50% stake in the allottee entity and had rights over the property allotted by KIADB.

Justice Nagaprasanna was unmoved, holding that:

“The petitioners are not the allottees, not the ones who approached KIADB for the allotment, and have no statutory role in the execution of the lease-cum-sale agreement. Their only grievance arises from an internal shareholder dispute dating back to 2004.”

Relying on the Supreme Court’s landmark rulings in Bacha F. Guzdar v. CIT, Ayaaubkhan Noorkhan Pathan v. State of Maharashtra, and Jasbhai Motibhai Desai v. Roshan Kumar, the Court ruled that:

“A shareholder cannot assert ownership over the assets of the company. Inchoate rights arising from a pending commercial dispute do not qualify as enforceable rights under Article 226 of the Constitution.”

Coordinate Bench’s Finding on Locus is Binding: “This Court Is Not Sitting in Appeal Over a Sister Bench”

A crucial part of the Court’s reasoning was anchored in judicial discipline and the doctrine of precedents. The same petitioners had previously filed similar writ petitions (W.P. Nos. 25857 & 25851 of 2024) challenging the KIADB’s extension of time for implementation of the project. A coordinate Bench, by its detailed order dated 30.10.2024, had squarely rejected those petitions on the ground of lack of locus standi, observing that:

“The instant petitions have been preferred by the disputed shareholders of the allottee entity solely to gain unfair advantage, settle personal scores and coerce the allottee into settlement.”

Justice Nagaprasanna, bound by judicial propriety, refused to re-adjudicate the issue:

“A subsequent Bench cannot disregard a coordinate Bench’s ruling, especially when it has neither been stayed nor reversed by a higher forum.”

Quoting the Supreme Court in Dr. Shah Faesal v. Union of India, the Court reiterated:

“Two courts of equal authority have no power to overrule each other’s decisions. To do so would be a gross violation of judicial discipline.”

Company Law and Public Land: No Place for ‘Shadow Litigation’ by Shareholders

At the heart of the petition was Clause 11(a) of the Lease-cum-Sale Agreement executed between KIADB and the allottee company, which permitted sub-leasing upon written approval. KIADB, after enquiry proceedings ordered by a Division Bench in earlier litigation, granted such approval on 07.02.2025. The petitioners, despite having no privity of contract, sought to challenge this administrative action.

The Court refused to entertain their challenge, holding that:

“Disputes between private shareholders cannot be transformed into matters of public law simply because the property involved is public land.”

It further observed:

“The so-called grievance is essentially a shareholder-level dispute pending before the Commercial Court in O.S. No. 234 of 2022. The petitioners have chosen the proper forum. They cannot now circumvent the civil proceedings by invoking writ jurisdiction.”

In conclusion, the Court remarked that the petitions were an “abuse of the constitutional remedy under Article 226,” pursued only to arm-twist the company into a business settlement.

Writ Petitions Dismissed, All Interim Orders Vacated

Justice Nagaprasanna dismissed the writ petitions with a stern reminder that public law remedies must not be used as weapons in private commercial wars. The petitioners, having been denied locus twice by coordinate Benches, and now again by this Court, were held disentitled to any relief under Article 226.

Accordingly, the Court ordered:

“Petitions stand rejected on the sole ground of lack of locus standi. Consequently, all interim orders subsisting shall stand dissolved.”

Date of Decision: 22 January 2026