The artwork, Portrait of Angel Fernandez de Soto, which was expected to fetch as much as $50.4 million (£37.5 million), was due to be sold off at Christie's in New York later this month (Jan10), but the sale has been halted amid allegations the painting was part of a Nazi haul in World War Two.
Julius H. Schoeps, an heir to German banker Paul von Mendelssohn-Bartholdy, claims his ancestor was forced to sell the Picasso for next to nothing after Nazis forced him to flee his home in the 1930s.
Schoeps launched a legal bid to prevent officials at the Andrew Lloyd Webber Art Foundation from selling the piece and a U.S. judge has agreed to place a temporary ban on the auction.
However, a spokesman for the foundation has dismissed the allegations, branding the claims "utterly spurious, without legal or factual substance".
The rep adds, "During the 11 years the charity has owned the picture no one has previously raised any questions about the ownership.
"It has been exhibited publicly several times at the National Gallery (in London) as well as the Royal Academy of Arts in London and the New York Fine Arts Fair."
Lloyd Webber purchased the masterpiece in 1995 for $28.8 million (£18 million) and later donated it to his art foundation.
Profits from the eventual sale of the painting will be donated to charity.