The Division Bench dismissed Chandy's petition challenging the Alappuzha district collector's report.
The court slammed the minister for approaching it challenging the government in which he is also a part.
"It's a classic case for disqualification".
Senior lawyer in Supreme Court Vivek Tankha argued that Chandy's petition was in private capacity but the bench pointed out that the first line of the petition itself identifies the petitioner as a minister. The NCP executive meet in Kochi on Tuesday discussed the matter and chose to inform the national leadership about its decision on it. Chandy, a businessman-turned-politician, is NCP's only minister in the Cabinet.
Alappuzha District Collector T V Anupama had recently submitted a report to the government, stating there was large scale violations of Kerala Land Conservation Act and Conservation of Paddy Land and Wetland Act.
NCP state president T P Peethambaran Master, however, did not disclose to the media the decisions arrived at the executive.
The state leadership of the Congress has expressed their strong resentment to the party high command. Congress leader Ramesh Chennithala said the verdict leaves no option for Chandy but to quit.
Vijayan had come under fire from several quarters for protecting Chandy, much against the wishes of the other allies of the Left Front government.
Mr Chandy is the Nationalist Congress Party nominee in the LDF ministry.
The LDF entrusted chief minister Pinarayi Vijayan on Sunday to take a decision.
A division bench of the court severely criticized the minister for such a move, saying that he can not approach the court as a minister and a common man at the same time.
Following the HC verdict, the chief minister finally ended his silence on the Chandy issue, telling mediapersons Tuesday that he would take the right decision on the issue at an appropriate time. Jayarajan was a leader of Vijayan's Communist Party of India (Marxist) and Saseendran was a leader of NCP.
Chandy is the third minister to face allegations in the almost 16-month-old Vijayan's cabinet. While E.P. Jayarajan, minister for industries and sports, had to leave after facing charges of nepotism previous year, A.K. Saseendran, minister for transport, quit following allegations of sexual misconduct in April.