The Ahmedabad bench of National Company Law Tribunal (NCLT) has admitted a petition for commencing corporate insolvency proceedings against OYO Hotels and Homes Pvt Ltd (OHHPL), a subsidiary of OYO group. On 30 March 2021, NCLT admitted the petition filed by OHHPL’s creditor Rakesh Yadav over some dues.
OYO group says it has filed an appeal with the National Company Law Appellate Tribunal (NCLAT), challenging the NCLT order against its subsidiary, OHHPL, for Rs16 lakh. The company also says the disputed amount of Rs16 lakh has already been paid to the claimant under protest by the entity with whom the dispute was raised (other than OHHPL).
"We are surprised to hear that the NCLT has admitted a petition against OHHPL, a subsidiary of OYO for Rs16 lakh in a contractual dispute, which 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,” OYO group says in a statement.
As per the Insolvency and Bankruptcy Code 2016 (IBC), a corporate insolvency process (or CIRP) can be initiated by an operational creditor or by a financial creditor filing an application for initiating CIRP of the debtor under the IBC before NCLT where there is a default. The NCLT reviews the CIRP application to check if it is complete and admits it if there is a default; once the application is admitted, CIRP is initiated.
Ahmedabad-based Keyur Jagdhishbai Shah, who is part of Keyur J Shah & Associates, has been appointed as interim resolution professional (RP) of the insolvency process. The RP will assume control of OYO subsidiary OHHPL, including its assets, invite claims from all creditors, and constitute the committee of creditors (CoC). The creditors of OYO Hotels and Homes have been ordered to submit the details of the claims by 15 April 2021. The estimated date of closure of the insolvency proceedings is 27 September 2021.
On 6th April, there were several reports saying that OYO has filed for bankruptcy under IBC 2016 and that the NCLT has ordered the beginning of a corporate insolvency resolution process of OYO Hotels and Homes.
Ritesh Agarwal, founder and chief executive of OYO, however, refuted these reports via a series of tweets and said that OYO has not filed for bankruptcy. The NCLT order pertains to the OYO Hotels and Homes Pvt Ltd (OHHPL) and not exactly for Oravel Stays Pvt Ltd, which owns and operates hotels and does business as OYO Rooms.
He says, "There is a PDF and text message circulating that claims OYO has filed for bankruptcy. This is absolutely untrue and inaccurate. A claimant is seeking Rs16 lakh (USD 22k) from OYO's subsidiary leading to a petition at NCLT."
"OYO has paid that under protest and amount already banked by the claimant. OYO has also appealed with the NCLAT about the matter. OYO is recovering from the pandemic steadily and our largest markets are operating profitably," he tweeted.
In the past couple of years, OYO has been facing multiple issues such as vendor ire over non-payments, income-tax (I-T) raids, massive lay-offs and the COVID pandemic has added to the stress. The company had announced salary cuts, furloughs and sought voluntary resignations from its employees in order to tide over the crisis.
Last week, OYO said it will cover COVID-19 vaccination cost for all its employees and their family members in India.
The employees and their family members in India can choose to get the vaccination done at any centre convenient to them and the costs would be reimbursed in full by the company.