People ride a double bicycle past a logo of the Alibaba Group at the company's headquarters on the outskirts of Hangzhou, Zhejiang province Nov 10, 2014.[Photo/Agencies]

Alibaba's financial affiliate has commenced an arbitration proceeding against Inner Mongolia Junzheng Energy & Chemical Industry Co to claim its 51 percent stake in the fund firm Tianhong.

Junzheng refused to inject capital into Tianhong Asset Management Co and dilute its stake as agreed between the company and the e-commerce behemoth, reported Caixin media on Sunday quoting a source close to the matter.

Alibaba Ant Small & Micro Financial Services filed for arbitration on Dec 10 last year, demanding Junzheng to contribute to the registered capital as agreed and refrain from its shareholder’s right.

The deal has caught public attention since May last year when Chinese regulators gave the go-ahead to Alibaba Ant Small & Micro Financial Services to take control of the fast-growing fund firm.

According to the agreement, Alibaba will invest 1.18 billion yuan ($189.11 million) and see the firm inject 262.3 million yuan in registered capital into the fund, while its original shareholder Junzheng will invest 69.4 million yuan for an addition of 15.4 million yuan in registered capital.

Alibaba Ant Small & Micro Financial Services is expected to own 51 percent of Tianhong after the completion of the deal, with Junzheng's stake decreasing from 36 to 15.6 percent, according to a filing last year.

Tianhong has gone from near obscurity to running China's biggest money market fund by assets under management in just months after it launched fund platform Yu'e Bao, or "leftover treasure", with Alipay in June 2013.