Disputes On Corporate Restructuring Must Be Decided by NCLT, Not Arbitrator: Kerala High Court

On 1 June 2026, the Kerala High Court held that disputes involving corporate restructuring and division of company assets fall within the exclusive jurisdiction of the National Company Law Tribunal (NCLT) and are non-arbitrable.

A Single Judge Bench of Justice Easwaran S allowed the petition challenging an arbitral ruling that had rejected a jurisdictional objection under Section 16 of the Arbitration and Conciliation Act, 1996. He observed:

“Albeit, this Courts finds that the dispute before the arbitrator qua the companies is essentially an intra- company dispute. Pertinently, the company is not a signatory to the MOU, whereas it is between two brothers. Moreover, the presences of a specialized statutory form like National Company Tribunal which is given exclusive power to adjudicate on the dispute touching upon the structure of the company and the rights of a minority shareholder, is a clear indication that the subject matter of the dispute is non- arbitrable.”

The dispute arose from a Memorandum of Understanding (MOU) between two brothers concerning the division of assets and liabilities of three companies: Pioneer Cars India Private Limited, Pioneer Motors (Kannur) Private Limited, and Wayanad Vehicles Private Limited.

The High Court noted that after it appointed a sole arbitrator under Section 11 of the Act, one party pursued claims seeking division of the companies' assets and liabilities in terms of the MOU.

During the arbitral proceedings, Purushothaman Thitta, a minority shareholder and respondent, objected to the tribunal's jurisdiction and contended that disputes relating to corporate affairs and restructuring fall exclusively within the domain of the NCLT.

The arbitrator rejected the objection and held that the dispute concerned ownership and shareholding issues, and therefore remained arbitrable. Aggrieved, Thitta approached the High Court.

Before the Court, Thitta argued that disputes relating to company affairs and restructuring cannot be referred to arbitration and must be decided exclusively by the NCLT. He further argued that any division of company assets would affect his shareholder rights and that he could not be bound by the MOU since he was not a signatory.

The respondents argued that the proposed division of assets would not affect shareholder rights and did not involve winding up or dissolution of the companies. They further contended that Thitta should await the final arbitral award before challenging the jurisdictional ruling.

The Court rejected this submission and held that a party need not wait for the final award where the arbitral tribunal assumes jurisdiction over a dispute that is inherently non-arbitrable. It observed:

“In a given case where the arbitral tribunal or the arbitrator acts beyond its Jurisdiction or for that matter a claimant initiates an arbitration on a dispute which is not arbitrable or governed by a separate mechanism provided under a statute, the opposite party is certainly entitled to raise the question of Jurisdiction and if it is rejected, can certainly approach this Court under Article 226 and 227 of the Constitution of India as the case may be.”

On examining the nature of the claims, the Bench found that the reliefs sought before the arbitrator effectively involved restructuring of companies and division of corporate assets. It noted:

“If in a given case, a case of total lack of Jurisdiction of the arbitrator is made out, it will be wholly impermissible for this court to hold that, the petitioner must still wait till the final award is passed by the arbitrator.”

Referring to Sections 241 and 242 of the Companies Act, 2013, the Court held that disputes relating to oppression, mismanagement, and corporate restructuring fall within the exclusive jurisdiction of the NCLT. It observed that where claims before an arbitrator touch upon the functioning and restructuring of companies, such disputes cannot be treated as matters arising out of a purely personal contract and instead fall within statutory adjudication. It clarified:

“when it is evident from records that, the claim before the Arbitrator touches upon functioning and restructuring of the companies, which falls under the exclusive jurisdiction of the National Company Law Tribunal under Section 241 read with Section 242 of the Companies Act, 2013, it is inevitable that this Court must hold that process of restructuring and re-division of the assets of the companies is of statutory in nature and cannot be a subject matter of a personal contract.”

Accordingly, the High Court held that the dispute was non-arbitrable and within the exclusive domain of the NCLT.

For Petitioner: Advocates Jawahar Jose, Sanand Ramakrishnan, Augustine P, Cissy Mathews, Gregory Prince Myladi and Thomas Martin K

For Respondents: Advocates Akhil K.M, T Ramesh Babu, C.K Sreejith, Nimisha P Shanmughan, Resmi S.S, P.V Vinod (Bengalam), D Reetha and Anjali Nair