Ahmedabad Court Calls Sealing Of OYO’s Office Illegal, Restores Access

In a relief to OYO, the Ahmedabad City Civil Court ordered to unseal one of the offices of the hospitality unicorn, saying the action was illegal. 

The order came a day after the court passed a “distress warrant” against OYO Hotels and Home Private Limited. Following this, a bailiff sealed OYO’s property, which is a coworking space. 

The startup moved the court against this move 

As per the order dated October 1, 2024, the Ahmedabad City Civil Court said that the decision to seal the property was beyond its jurisdiction. “… this court only issued a distress warrant though the service person went beyond said warrant and sealed the property,” the order read. 

At the heart of the issue is a payment dispute between Ahmedabad-based Meridian Hotels Ltd, which claims overdue payments from OYO. The dispute between the two parties went to arbitration and a sole arbitrator ordered OYO to pay INR 4.6 Cr to Meridian Hotels.

In its order, the court said that Meridian Hotels application didn’t mention that OYO had already challenged the arbitration award. “The court passed the order for warrant under impression that subjected award finality,” the court noted. 

Following the order, the sealed office was reopened around 5 PM today on Tuesday (October 1). 

Responding to Inc42’s queries, Gaurav Dave from Nanavati Associates, which represented OYO in the case, said, “The Honourable Court has passed an order of removing the seal today itself from the coworking place. The Honourable Judge noted that the opposite party misled the court by not disclosing that this was an ongoing litigation under appeal and that the bailiff has overstepped his jurisdiction in the blocking action of coworking space.”

Meanwhile, Inc42 has learnt that Meridian Hotels plans to appeal against the order court in the coming days.

Commenting on the issue, an OYO spokesperson said that partial access to the coworking office, in which some of its employees also sit, was blocked temporarily. 

“This is a matter where the appeal is pending in front of the court; however, it was hidden by Mr Tekwani’s (Meridian Hotels’ owner) counsel with an intent of mischief to reach out office premises. The court, after learning this matter is under appeal, has issued access to the coworking office again with immediate effect… Most of our employees in Ahmedabad sit out of company-owned hotels. The other companies sitting from the coworking space continued to have access,” the spokesperson added.

Commenting on the dispute, the spokesperson said that it is an “old rare” ongoing litigation from 2020 regarding the organisation terminating a hotel contract due to non-compliant hotel conditions. 

“We didn’t receive any prior notice which is mandatory in law, else no action would have happened in a sub judice case. We are also confident of winning this case and have full respect for the court’s final verdict,” the spokesperson added.

Sources told Inc42 that the dispute between OYO and Meridian Hotels arose amid the pandemic in 2020, when the former changed its business model. 

Prior to the pandemic, OYO used to provide a minimum revenue guarantee to hoteliers. It also used to have around 5 years of Master Service Agreement with hoteliers, with a lock-in period of a couple of years. 

Following the pandemic, OYO moved to a revenue-sharing model, resulting in several hotels moving court against it citing breach of agreement and overdue payments.

The latest development came days after OYO announced a $525 Mn acquisition of US-based G6 Hospitality, the parent entity of Motel 6 and Studio 6 brands, in a bid to expand its footprint in the US. The unicorn is eyeing international expansion to grow its top and bottom lines. In August, OYO also acquired Paris-based Checkmyguest.

Talking about financials, the startup posted its first complete year of profit in FY24. It reported a net profit of INR 229 Cr in the year ended March 31, 2024 as against a net loss of INR 1,286.5 Cr in the previous year. Operating revenue declined 1.3% to INR 5,388.7 Cr from INR 5,463.9 Cr in FY23.