Jayakumar Hiremath, who was sitting in the VIP enclave, threw pamphlets demanding appointment of Lokayukta when Shettar was inspecting the Independence Day parade on a vehicle, police said.
However, the Chief Minister remained unfazed and went on with parade inspection.
Hiremath, an executice committee member of All India Freedom Fighters Sangha, was overpowered and whisked away by police immediately after the incident and arrested, police said.
The post of Lokayukta was lying remained vacant since September 19 last year after former Supreme Court Judge Shivaraj Patil, who succeeded high-profile Santosh Hegde, quit in the wake of allegations of getting land allotment in violation of rules.
After his exit, the BJP government recommended the name of former Kerala High Court Chief Justice S R Bannurmath, but the Governor refused to accept it insisting on a "spotless candidate".
On July 23, Karnataka High Court had directed government to begin the process of appointment and rejected its contention that Lokayukta would be appointed after the Supreme Court gave its verdict on a Special Leave Petition challenging the High Court's order of quashing appointment of Justice Chandrashekaraiah as Upa Lokayukta.
It had observed that the issue before the apex court was about appointment of Upa Lokayukta and the government should initiate consultation on appointing Lokayukta.