The drama started when it was suggested a villainous singer in the new musical was inspired by former winner James… and as it wasn't the most flattering of portrayals, it had Mr Arthur slightly angry…
James tweeted a story suggesting the link, adding: @SimonCowell I should "shut up and put out records" or else this?"
But Simon, 54, later responded, saying: "For the record no character in I Can't Sing is based on James Arthur. Have no idea where that came from."
Singer-songwriter James, 26, won the ninth series of X Factor in 2012, and went on to release single 'Impossible', which topped the UK charts and sold a whopping 2.5 million copies worldwide.
His debut album was released in November 2013, and reached number two in the album's chart.
But alongside the professional success, he's faced controversy. Last year, James had to apologise after a song surfaced featuring him rapping homophobic lyrics, and briefly retired from Twitter amid the furore.
In November, James cancelled all public engagements after being diagnosed with acute exhaustion and ordered to rest by doctors.
Meanwhile, the X Factor-inspired musical I Can't Sing, written by Harry Hill, opened this month at the London Palladium.
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Watch James' music video for 'You're Nobody 'Till Somebody Loves You'