Corporate Restructuring and Asset-Division Disputes Are Non-Arbitrable and Belong to NCLT: Kerala High Court

Disputes involving corporate restructuring and the division of company assets are non-arbitrable and fall within the exclusive jurisdiction of the National Company Law Tribunal (NCLT). That was the conclusion of the Kerala High Court on 1 June 2026 in Purushothaman Thitta v Pothan Rajan, a decision that sharpens the boundary between private arbitration and the statutory company law framework. The judgment adds to a developing body of case law on this jurisdictional question, including the issues raised when an arbitration clause meets the NCLT's powers in company disputes.

What the Kerala High Court Held

A single judge bench of Justice Easwaran S allowed a petition under the Arbitration and Conciliation Act, 1996, challenging an arbitral tribunal's decision to reject a jurisdictional objection. The Court held that questions concerning corporate restructuring and the division of a company's assets are matters that the Companies Act, 2013 reserves for the NCLT, and that an arbitral tribunal cannot assume jurisdiction over them.

The arbitral ruling that had brushed aside the objection raised under Section 16 of the Arbitration Act was accordingly set aside. The High Court reasoned that the nature of the relief sought required the structural powers that only the company law tribunal can exercise, which placed the dispute beyond the reach of a private arbitrator. The Court emphasised that arbitrability is not merely a matter of the parties' consent, but also of whether the legal system permits the particular category of dispute to be decided privately at all.

Background: A Minority Shareholder's Objection

During the arbitral proceedings, a minority shareholder objected to the tribunal's jurisdiction, arguing that disputes relating to corporate affairs and restructuring belonged exclusively to the NCLT. The tribunal rejected the objection and proceeded, prompting the affected party to approach the High Court. The High Court agreed with the shareholder and held that the subject matter was inherently non-arbitrable because it engages statutory powers and remedies that only the company law tribunal can grant.

The case is a reminder that the presence of an arbitration clause does not, by itself, settle the question of where a dispute must be resolved. Courts will look at the substance of the relief claimed, not merely the label the parties have placed on their agreement. A dispute does not become arbitrable simply because it is described as a contractual disagreement when, in substance, it seeks remedies that only the tribunal can grant.

When Are Disputes Non-Arbitrable in India?

Indian courts assess arbitrability using the framework laid down by the Supreme Court in Vidya Drolia, which identifies categories of disputes that cannot be referred to arbitration, including those involving rights in rem and matters reserved for specialised statutory forums. Company law disputes that require the exercise of the NCLT's statutory jurisdiction, such as restructuring, oppression and mismanagement, and winding up, generally fall outside the scope of arbitration because an arbitrator simply cannot exercise those powers, since an award cannot direct the kind of structural reorganisation of a company that the statute contemplates.

By contrast, a genuine contractual dispute between shareholders, such as a claim for damages for breach of a specific covenant, may still be arbitrable. The dividing line is whether resolving the dispute requires the company law remedies that the legislature has entrusted exclusively to the tribunal.

NCLT vs Arbitration: The Jurisdictional Line

The decision reinforces a clear principle that parties cannot, by inserting an arbitration clause, oust the jurisdiction that a statute confers on a tribunal. Where a dispute genuinely concerns contractual rights between parties, arbitration may be appropriate, but where it requires the structural remedies of company law, the NCLT is the proper forum. This distinction is critical for founders and investors drafting shareholder agreements, a point relevant to anyone setting up a company through how to register a private limited company in India.

Related Reading

For more on the limits and discipline of arbitration, see our explainer on arbitration limitation periods and how the Competition Amendment Act changed India's merger control framework.

If you are choosing a business structure, read how to register an NGO in India: trust, society or Section 8 company, and our coverage of the NCLT admitting SBI's personal insolvency plea against Anil Ambani.

Key Takeaways

The Kerala High Court has held that corporate restructuring and asset-division disputes are non-arbitrable and fall within the exclusive jurisdiction of the NCLT. An arbitration clause cannot oust statutory company law jurisdiction, and matters requiring the tribunal's structural remedies must go before it. Parties drafting shareholder and joint-venture agreements should carve out company law disputes from arbitration clauses to avoid jurisdictional challenges later, while keeping genuinely contractual claims within arbitration where appropriate. For founders and investors, the practical step is to draft dispute resolution clauses that separate company law matters from ordinary commercial disputes, reducing the risk of a jurisdictional fight at the very start of a dispute.