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NCLAT allows FHRAI to submit member non-payment claims against OYO

NCLAT allows FHRAI to submit member non-payment claims against OYO
Photo Credit: 123RF.com
18 May, 2021

Hospitality industry body Federation of Hotel & Restaurant Associations of India (FHRAI) on Monday announced that the National Company Law Appellate Tribunal (NCLAT) in its latest hearing in the OYO insolvency case allowed the body to intervene with non-payment claims of its members. 

The tribunal will let FHRAI make verbal submissions on June 2. 

Senior counsel Kishendu Datta appeared for FHRAI, filing an application on behalf of operational creditors of OYO, totaling outstanding dues of approximately Rs 72 crores. This takes the total claims registered with the Insolvency Resolution Professional (IRP) against OYO to around Rs 200 crores. 

The association also mentioned pending cases of several hoteliers against OYO.  

“Oyo has closed a majority of its operations and offices across India to further cheat member hotels and other similarly placed companies,” the apex body stated in a note. 

The hotel members stated that OYO had entered into various kinds of agreements ranging from leave and license agreements to Management Services Agreement with minimum return assurances but eventually breached the terms of these agreements. 

“Oyo operates its business under maze of more than a dozen subsidiary entities that have agreements with hotels. FHRAI has data of hundreds of such hotels that have reported payment defaults and other unethical business practices by Oyo. The FHRAI has also filed a case in the CCI against Oyo for anticompetitive practices and cartelization, which is presently under investigation. The systemic depredation of the budget segment hotel business and its market as a means to achieve notional billion-dollar valuation for OTAs is a serious cause of concern for FHRAI,” Pradeep Shetty, joint honorary secretary, FHRAI said. 

“The FHRAI has presently filed the application before the NCLAT on behalf of aggrieved hotels and restaurants across India who have filed their claims with the Insolvency Resolution Professional (IRP). Many are small standalone hotels that are fighting to survive in an extremely competitive market... The development in the case has given a sense of relief to several hotels across the country who felt short changed by Oyo's sudden change in their alignment and policy,” Gurbaxish Singh Kohli, vice president, FHRAI added. 

Earlier, NCLAT had ruled in favour of OYO. It had stayed an NCLT order for the formation of the committee of creditors (COC) in the insolvency and bankruptcy proceedings against Oravel Stays subsidiary OYO Hotels and Homes. 

In an emailed statement, an OYO spokesperson said, ""This is consistent with the baseless and negative propaganda perpetuated by FHRAI to mislead the small hoteliers of this country. This is especially surprising given the grim situation driven by Covid 2.0. They are on purpose mis-representing the views and directions of the honorable courts of India. Given the matter is sub-judice, we have no further comments at this point." Jeevan Bhalla Panda, OYO's counsel for the appeal Anuj Tejpal versus Rakesh Yadav & ANR, added,""Kindly note that the applications seeking to intervene in the appeal are yet to be heard, let alone being allowed and do not have any merit. The Hon'ble NCLAT also did not allow any written submissions to be filed by any intervener except only to make an oral submission to show why they should be allowed to intervene at all. FHRAI has no locus standi whatsoever."