OYO subsidiary OYO Hotels And Homes is facing NCLT bankruptcy proceedings over alleged failure to pay fees to a hospitality business

In response, OYO has stated that it has already challenged the NCLT case and also claimed to have settled the outstanding debt

The NCLT has agreed to hear the cause of action filed by the creditor and has asked other creditors to come forward by April 15

The National Company Law Tribunal (NCLT) today (Wednesday, April 7, 2021) agreed to hear a bankruptcy petition filed by an OYO hotel partner called Conclave Infratech. However, in response, OYO has stated that it has already challenged the NCLT case and has claims to have finished the outstanding INR 16 lakh as disputed by the Hyderabad based hotel group.

Conclave Infratech, which owns and manages The Conclave hotel group, previously filed for bankruptcy against OYO subsidiary OYO Hotels and Homes Private Limited (OHHPL).

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

The financial creditors or the affiliates to whom OYO owes money will have priority if the NCLT decides to authorize bankruptcy. However, a date for the oral hearing has not been set, although the insolvency proceedings have been running since March 30, 2021.

In response, an OYO spokesman said: “We are surprised to hear that the Hon’ble NCLT has admitted a lawsuit against OHHPL, a subsidiary of OYO, for INR 16 lakhs in a contract dispute which is not even a dispute with that subsidiary. We have appealed. The matter is pre-trial and we would refrain from further commenting on the merits of the matter at this stage. We have strong faith and trust in our justice system.”

Ritesh Agarwal, Founder and CEO of OYO, also took to Twitter to clarify speculation about OYO filing for bankruptcy Twitter.

In the past, the NCLT has initiated similar bankruptcy proceedings against technology companies. In February 2020, Flipkart also received such a petition, which was finally set aside. Last year the NCLT dhas failed to obtain an order from the competent bankruptcy court that dismissed the bankruptcy proceedings against Flipkart by Cloudwalker Streaming Technologies Pvt Ltd.

What next for OYO in the event of bankruptcy?

A lawyer who deals with insolvency and bankruptcy cases tells Inc42 that OHHPL could either be restructured, sold to another company, or simply closed, depending on the claims of other creditors.

“It is possible that OYO will fiercely appeal the NCLT decision, but they (OYO) would have limited options unless they had a material basis to do so. The scope for appeal (to be accepted) is rather limited at this stage and is subject to disclosure of all facts by OYO,” added the attorney cited above, asking to remain anonymous.

“When a claim is outstanding and there is no dispute that was raised in a timely manner (ie the recognized amount of the claim) then the numerical value is of little importance,” the attorney added.

It is important to note that several hotel partners had previously worked with OYO took the hospitality startup to court in June 2020 for alleged non-payment of dues. At that time, a bank headed by the Delhi High Court ordered OYO to file an affidavit detailing the company’s unencumbered (debt-free) assets. The order came in the light of a case by hospitality company Anam Datsec, which accused OYO of failing to pay fees for its Golden Sands property in Calangute, Goa and sought in excess of INR 8 Cr in damages.