OYO Says Creditors Have ‘No Grounds’ To Claim Disputes Of INR 250 Cr In Ongoing Insolvency Plea  

Almost two months after one of OYO’s subsidiary unit OYO Hotels and Homes Private Limited (OHHPL) was dragged to tribunal court under the bankruptcy and insolvency code, multiple creditors have filed claims amounting to INR 250 Cr, Inc42 has learnt from multiple sources aware of the development.

Gurugram-based hospitality startup OYO, however, denied unverified claims made by several creditors (ex hotel partners) on its ongoing insolvency case filed against it back in April 2021.

An insolvency plea was filed against the OYO subsidiary at the National Company Law Tribunal (NCLT) on April 1 by Yellow White Residency Hotel, based in Gurugram. On April 7, the NCLT agreed to hear the insolvency plea and appointed advocate Keyur Jagdishbhai Shah as the Interim Resolution Professional (IRP) to lead the proceedings.

The insolvency petition was originally filed by Rakesh Yadav, the owner of Yellow White Residency Hotel against OYO for a disputed amount of INR 16 lakh.  However, OYO had appealed for a stay on the insolvency proceedings in the National National Company Law Appellate Tribunal (NCLAT) on April 8, following which the NCLAT provided a partial stay order on the proceedings. 

The NCLAT on April 8 provided a stay on the formation of CoC (Committee of Creditors), although the Corporate Insolvency Resolution Process (CIRP) against OHHPL continued in the tribunal court. Under the CIRP proceedings, any creditor belonging to OHHPL was allowed to file for disputed money owed to them.

Under this process, the original disputed claim of INR 16 lakhs has now piled up and grown to INR 250 Cr, but is yet to be verified and approved by the court. The rest of the claims were made by the Federation of Hotel & Restaurant Associations of India (FHRAI) on behalf of hoteliers and other independent OYO hotel partners.

The FHRAI, a hotel association consisting of thousands of hotel brands on June 2, 2021 filed an interlocutory application on behalf of its members claiming unpaid dues of INR 90 Cr from OHHPL. FHRAI was represented by advocate Krishnendu Datta on June 2, 2021 hearing in the NCLAT. 

In legal terms, an interlocutory application is a request made by one party asking the court to help with an ongoing legal case. Such applications can be filed for either seeking a special request or for protecting the rights of the party involved in the case. In any interlocutory application made by a party, the opposing party has to agree to the demands or requests; if the opposing party does not consent to the application, then the court goes for an interlocutory hearing.

However, in a statement on Saturday OYO said that it “vehemently denies” all the unverified claims being made in the ongoing insolvency resolution process with the NCLAT. Currently, the NCLAT matter is adjourned to July 02, 2021.

“The company would like to clarify that the recent hearing on June 02, primarily included procedural follow-ups of the previous hearing. As before, the interveners have now been asked to file applications. It is important to understand that their applications will be heard and decided subsequent to OYO’s submissions. Meanwhile, the stay on the formation of the committee of creditors continues,” OYO added in its statement.

OYO further highlighted that the interveners have “no locus in this matter” and that the disputed claims are not grounds for intervention. “The company also denied the unverified and baseless rumors being made around the monetary claims involved in the matter,” the hospitality startup added.

Under India’s Insolvency and Bankruptcy Code, 2016, a CoC is formed and authorised to decide upon the regular functioning of the company i.e. the debtor during the insolvency resolution process. Any creditor can take a company for insolvency over disputed dues. Once a petition is admitted by the NCLT, a resolution professional is appointed who examines the claims of creditors and supervises the settlement of claims if any. 

“Learned Senior Counsel Mr. Krishnendu Datta the proposed intervenors submitted that after issuance of Expression of Interest he is representing Hotel Federation of India which is association of several hotels constituted in this country and there are not more than INR 90 Cr is due to different hotels which Appellant (OYO) has to pay and hence they are opposing the I.A. Application,” the NLCAT order said on July 2.

Apart from NHRAI, seven more interlocutory applications were filed in the NCLAT by other independent hotel partners of OYO. These amounts were not disclosed on the written order, which Inc42 was able to access.

“The court will have to individually hear out these parties, and a decision is yet to be made on whether to admit the additional claims. The only point the court is contending on is whether to allow interventions at the current stage. That is yet to be decided by the court,” Keyur Jagdishbhai Shah, the IRP in the ongoing insolvency case told Inc42.

OYO’s Tryst With Hotel Partners

It is important to note that this isn’t the only insolvency case that is ongoing against OYO. In March 2020, Conclave Infratech, which owns and manages ‘The Conclave’ group of hotels, had filed an insolvency plea against OYO’s parent entity named Oravel Stays Pvt Ltd for allegedly breaching contracts of an agreement. Conclave Group alleged that OYO did not honour monthly assured payments of INR 13 lakhs per month since March 2018. 

Speaking to Inc42, one of the creditors who had filed for his claims said that the different insolvency pleas filed against OYO in tribunal courts point out systematic negligence on OYO’s part in making payments to partners. 

“Actually this particular NCLAT case (Rakesh Yadav vs OYO) was the first breakthrough for aggrieved, small, hoteliers like us. For the first time, we are able to freely submit our claims directly to the IRP through Form B as per the Public Announcement without having to spend heavily on lawyers to file cases in regular courts which most of the small claimants cannot afford,” said Ganesh Kumar, Director Of Chennai-based hotel brand Krishvila NGK.

Kumar added that more than 250 hotel owners who worked with OYO have formed an unofficial group and are planning to file intervention applications and seek claims with the IRP.  However, it isn’t clear whether the court would allow any more claims at this point; the IRP of ongoing case Keyur Shah pointed this out above.

OYO isn’t the only startup being dragged to tribunal courts under the insolvency code. 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.

However, OYO has a troubled history of financial disputes with hotel owners and is currently fighting several such cases in other courts across the country. 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.