In what is good news for hotel aggregator platform OYO Hotels & Rooms (and definitely a major setback for the large number of hotel businesses that had sought to drag the startup to court), the National Company Law Appellate Tribunal (NCLAT), has given its go-ahead for the withdrawal of an insolvency case against the company.
The case in question pertained to OYO vs. hotelier Rakesh Yadav, which had been settled some time ago in an out-of-court agreement. The case was filed by Gurgaon-based Yadav back in 2019, and advocate Keyur Jagdishbhai Shah had been appointed as the interim resolution professional (IRP).
However, the suit had eventually encouraged scores of other hoteliers to file claims against the platform with the National Company Law Tribunal or NCLT, apparently demanding more than ₹200 crore.
Following their complaint, the Ahmedabad bench of the Tribunal had officially launched a corporate insolvency resolution proceedings (CIRP) case against OYO Hotels & Homes, basing it off the initial application that had been filed by Yadav. The proceedings for the same had begun under the Insolvency and Bankruptcy Code (IBC), against which OYO filed an appeal with NCLAT. This led to a temporary stay order on the formation of a committee by the creditors (hoteliers). However, filing of claims against the firm had been allowed.
But on July 7, the NCLAT has officially scrapped the order by the NCLT. Owing to this, the creditors have been restricted from making intervention applications against OYO, which, in effect, means that the case is now closed.
Still, the hoteliers have something to look forward to, as they still reserve the right to approach the debtor (OYO) for talks about entering into an out-of-court corporate settlement. At the same time, this right is only partial, as it does not make it mandatory for the platform to agree to the terms made by the creditors.
Another right of the hoteliers that was reserved by the ruling on July 7 allows them to appeal to the NCLT individually, should they have their own claims. This could lead to a fresh launch for the CIRP.
Following the order, OYO issued a statement, through Rohit Kapoor, the firm’s CEO in India and Southeast Asia. Kapoor said, “We had already settled with the original claimant but subsequent interveners with vested interests who were not a party to the case had delayed its closure. We remain committed to building the most trusted brand for our partners and resolving all issues, as we’ve been proactively doing in the past. COVID-19 has impacted the travel industry significantly and we believe the efforts of industry organizations should be to help resurrect the industry during this grim time. Despite today’s judgment, we welcome collaborative conversations with them and all other associations to work towards the resurgence of travel in India.”
