Bengaluru: The Delhi High Court has ordered hospitality startup Oyo Hotels and Homes to list details of all unencumbered assets — hotels and properties free of debt and other liabilities — on a plea by a hospitality firm seeking damages. The court directed Oyo to submit the details within two weeks.
The high court bench passed the order on 7 July in a case filed by Anam Datsec Pvt Ltd seeking ₹8 crore in damages from Oyo for non-payment of dues.
Anam Datstec operates hotel chain ‘The Golden Hotels’ in Goa.
In its petition, Golden Hotels claimthat Oyo had entered into a minimum business guarantee deal in 2018. However, the Softbank-backed startup failed to honour monthly payments worth ₹14 lakhs, the hotel operator alleged in its petition.
The high court directed Oyo to submit information such as a list of hotels, shareholding status, and valuations of properties in a ‘sealed envelope’ so that the information doesn’t get publicly recorded during the proceedings.
The Delhi HC order against Oyo comes after the startup had invoked force majeure in March, after the lockdown was announced by the government. By invoking the clause, Oyo sought to suspend minimum payment guarantees agreements with hotel partners, and terminated contracts with several partners since March.
Mint reported in July that at least 250 hotel owners have received intimation from Oyo after the company terminated minimum business guarantee agreements with owners. Oyo has instead offered new terms, asking hotel owners to adopt a revenue-sharing model.
Most of the hotel owners who received notices from Oyo operate ‘Townhouse’ hotels in partnership with Oyo. Townhouse is positioned by Oyo as a “mid-market boutique hotel brand” and are present across 19 cities, operating on a franchise model.
Sameer Rohatgi, an advocate appearing for Golden Hotels told Mint that Oyo has similar legal cases filed by property owners against it, seeking several crores in damages. The total size of these alleged damages owed by Oyo to many property owners contesting parallel cases might amount to a higher value than the actual value of properties the startup currently owns, according to Rohatgi.
“By ordering Oyo to file a statement of truth (affidavit) detailing its value of unencumbered assets, the court is validating whether the company has enough liquidity in the event they (Oyo) could be asked to settle damages during the arbitration process,” Rohatgi said.
“The matter is sub-judice and respectfully honouring the Hon’ble Court’s direction, OYO refrains to make any comment in relation to sub-judice matters and will appropriately respond to the allegations raised by Anam Datsec in its reply basis the opportunity given by the Court,” said an Oyo spokesperson.
While a few hoteliers like Golden Hotels have decided to take legal action, others are trying to negotiate with other hotel aggregators or sell their properties to a new buyer.
Townhouse co-owners said they had chosen to partner with Oyo because the fixed minimum business guarantee payments were more attractive than other alternatives in the market. Typically, Townhouse property owners had entered into a 5-7 year contract, wherein Oyo would take over the property and renovate it. The contracts had a 2-3 year lock-in period.