Just In: NCLAT allows withdrawal of OYO's insolvency proceedings

The CEO and founder of Oyo Hotels, Ritesh Agarwal

In a major disappointment to scores of hoteliers who had filed claims against Softbank-backed OYO Hotels' subsidiary following an insolvency petition against the company, the National Company Law Appellate Tribunal (NCLAT) on July 7, disallowed their intervention in effect closing the case against the hospitality firm.

"Their (OYO) application for withdrawal has been allowed and our intervention applications have been disallowed," said lawyers of one of the hoteliers requesting anonymity.

However, it provided a little breather to the creditors by reserving their right to approach the corporate debtor (OYO) to enter into a settlement. Even though it will completely be the prerogative of the company whether it wants to settle the case with the hoteliers or not, an acknowledgement by the court gives an impetus.

It must be noted that OYO has also made an out of the court settlement with the original party, Rakesh Yadav, a Gurgaon-based hotelier who had moved NCLT against the company.

OYO was first served a notice by Yadav in 2019. The National Company Law Tribunal (NCLT) admitted a plea for corporate insolvency proceeding against OYO Group's subsidiary OYO Hotels and Homes Pvt Ltd (OHHPL) in April following the hotelier's complaint.

It also appointed advocate Keyur Jagdishbhai Shah as the interim resolution professional (IRP), besides asking other creditors of the company to submit their claims as well, in keeping with the insolvency code.

While the IRP did not reveal the amount of claims by the creditors it is expected to be upwards of Rs 200 crore.

Even as this happened, OYO was quick to challenge the order in the National Company Law Appellate Tribunal.

During the same week, providing interim relief, NCLAT halted the formation of a committee of creditors following an appeal by OHHPL stating that a demand draft of Rs 16 lakh, the pending amount claimed by Yadav, was issued to him under protest.

The court on July 7 also reserved the right of all the financial creditors to approach the NCLT separately in case they have their own claim and recommence the corporate insolvency resolution process.

"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," said Rohit Kapoor, chief executive officer India and Southeast Asia.

This story has been updated with comments from OYO.