OYO Challenges NCLT Insolvency Proceedings Against Subsidiary; Claims Settlement

The National Company Law Tribunal (NCLT) today (Wednesday, April 07, 2021) has agreed to hear an insolvency plea filed by a OYO hotel partner named Conclave Infratech. However, in response, OYO has said that it has already challenged the NCLT proceedings and also claimed to have settled the outstanding INR 16 Lakh, as disputed by the Hyderabad-based hotel group.

Conclave Infratech, which owns and manages ‘The Conclave’ group of hotels, had earlier filed an insolvency plea against OYO subsidiary OYO Hotels and Homes Private Limited (OHHPL). 

According to the notification by the Insolvency Bankruptcy Board Of India (IBBI), an Interim Resolution Professional (IRP) has already been appointed to lead the insolvency proceedings on behalf of OYO. The IBBI urged all OHHPL creditors to share information regarding outstanding dues and other information before April 15.

The financial creditors or those partners who are owed money by OYO will receive first priority in case the NCLT decides to rule in favour of the insolvency. However, a date of hearing has not been set, although the insolvency proceedings have been ongoing since March 30, 2021.

In response, an OYO spokesperson said, “We are surprised to hear that the Hon’ble NCLT has admitted a petition against OHHPL a subsidiary of OYO for INR 16 Lakhs in a contractual dispute, which dispute is not even with this subsidiary. We have filed an appeal. The matter is sub-judice and we would refrain from commenting further on the merits of the matter at this stage. We have strong faith and belief in our judicial system.”

OYO founder and CEO Ritesh Agarwal also took to Twitter to clarify speculations about OYO filing for bankruptcy on Twitter. 

In the past, the NCLT has initiated similar insolvency proceedings against tech companies. In February 2020, Flipkart also received such a petition, which was eventually set aside. Last year, the NCLT had dismissed an order of the dedicated bankruptcy court which had initiated insolvency proceedings against Flipkart by Cloudwalker Streaming Technologies Pvt Ltd.

What Next For OYO In Insolvency Case?

A lawyer who looks into insolvency and bankruptcy cases told Inc42 that depending on the claims from other creditors, OHHPL could either be restructured, sold off to another company, or simply shut down.

“It is a possibility that OYO will vehemently appeal the NCLT decision, but they (OYO) would have limited options unless they have a substantive basis for this. Scope for appeal (to be accepted) at this stage is rather limited and is subject to full facts being revealed by OYO,” added the lawyer quoted above asking to remain anonymous. 

“If a claim is outstanding, and there isn’t a dispute that has been raised prior in time (i.e. the admitted amount of outstanding) then the number value is of little relevance,” the lawyer added.

It is important to note that several hotel partners working with OYO had earlier taken the hospitality startup to court in June 2020 over alleged non-payment of dues. At that time, a bench headed by the Delhi High Court ordered OYO to file an affidavit detailing unencumbered (debt-free) assets owned by the firm. The order came in the light of a case filed by hospitality company Anam Datsec, which had accused OYO of non-payment of dues for its Golden Sands property at Calangute in Goa and sought more than INR 8 Cr in damages.