Kerala High Court: Company restructuring and shareholder rights disputes are not arbitrable; NCLT alone has jurisdiction

The Kerala High Court has ruled that disputes involving restructuring of companies, division of corporate assets and alteration of shareholder rights cannot be decided through private arbitration. Such matters fall within the exclusive jurisdiction of the National Company Law Tribunal (NCLT) under the Companies Act, 2013.

Justice Easwaran S. set aside an arbitrator's order that had rejected a jurisdictional objection under Section 16 of the Arbitration and Conciliation Act, 1996. The Court held that although interference with arbitral proceedings under Article 227 of the Constitution should be exercised sparingly, the High Court can intervene when an arbitral tribunal assumes jurisdiction over disputes that are inherently non-arbitrable or are reserved for a specialised statutory forum.

The dispute arose from a Memorandum of Understanding between two brothers regarding division of assets and liabilities of three companies: Pioneer Cars India Private Limited, Pioneer Motors (Kannur) Private Limited and Wayanad Vehicles Private Limited. The claimant sought division of assets, restructuring of the companies and allocation of shares through arbitration.

A minority shareholder challenged the arbitral proceedings, arguing that issues relating to corporate restructuring, oppression of shareholders and company management could only be adjudicated by the NCLT under Sections 241 and 242 of the Companies Act. The High Court accepted this contention, holding that the reliefs sought affected the companies' structure, shareholders and third-party rights and therefore constituted actions in rem rather than purely private contractual disputes.

Relying on the Supreme Court's decision in Vidya Drolia v. Durga Trading Corporation, the Court observed that disputes requiring centralised adjudication under a statutory framework cannot be resolved through arbitration merely because an agreement contains an arbitration clause. The Court terminated the arbitral proceedings insofar as they concerned the three companies, while leaving the parties free to pursue appropriate remedies before the NCLT.

Case: Purushothaman Thitta v. Pothan Rajan & Anr. (2026:KER:37218)