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No intention of stopping Oyo's IPO, just want our shares preserved: Zo Rooms; court adjourns hearing to Oct 7

The issues between the two companies date back to 2015 when Zo Rooms, the budget hotel accommodation chain owned by Zostel Hospitality, was shut down after the merger talks between the two, which could have resulted in Zo Rooms getting a seven percent stake in Oyo, failed.

September 29, 2021 / 05:31 PM IST


The Delhi High Court on September 29 adjourned the hearing in the Oyo-Zo Rooms case to October 7, asking the latter to submit the rejoinder on record.


Clarifying the company's stance, advocate Amit Sibal who was appearing on behalf of Zo Rooms, requested for their shares to be preserved till the next hearing adding that Zo's intention was not to stop Oyo's initial public offering (IPO).




The issues between the two companies date back to 2015 when Zo Rooms, the budget hotel accommodation chain owned by Zostel Hospitality, was shut down after the merger talks between the two, which could have resulted in Zo Rooms getting a seven percent stake in Oyo, failed.


Sibal requested Justice C. Harishankar if the contested seven percent stake could be kept in escrow till Oct 7 given that Oyo is expected to file for an IPO shortly.



According to him, Oyo has filed in ROC a form declaring that it intends to conduct an initial public offering and that it has converted itself from a private company to a public company.


"Now if they go ahead and conduct the initial public offering then these shares will be no longer available for allotment to me in that eventuality. Therefore I was seeking that there be protection that if I succeed and they do not succeed in their objections to the award then at least my ability to have those shares is preserved," said Sibal.


"I am not here wanting to stop an IPO, but only to preserve the seven percent share. If the shares are kept in an escrow in the meantime then the purpose is served," he added.



However, the judge categorically denied this saying this couldn't be done without hearing the "contested matter".


The development happened after Zo reached out to the Delhi High Court seeking protection of its rights against the company at a time Softbank-backed Oyo is preparing to file the draft prospectus for its initial public offering.



Moneycontrol reported about it on September 28.


The two companies have been fighting this issue for almost three years now.




In March, early this year, nearly three years after the deal between the two collapsed, a Supreme Court-appointed arbitrator had finally said that Oyo was in breach of its agreement for the acquisition of Zo Rooms, adding that the latter can proceed to execute the definitive agreement.


Now reaching out to the Delhi High Court, Zo has stated that the award clearly stated that the term sheet between Oyo and Zostel was a binding contract which was breached by Oyo by not executing the definitive agreements and not transferring the seven percent shares to the shareholders of Zostel, as committed.


However, Oyo denies the claim stating that the tribunal had granted no specific relief to Zostel in terms of receiving ownership in Oyo.


Oyo had backed off from the deal talks citing liabilities of Zo Rooms. It claims that it had identified several issues during the due diligence process, where significant liabilities and unpaid dues, as well as undisclosed contingent liabilities, came to the fore.

Zo's legal counsel is also thrusting on the Securities and Exchange Board of India (SEBI) rules that state that an issuer shall not be eligible to make an IPO if there are any outstanding convertible securities or any other right which would entitle any person with any option to receive "equity shares of the issuer."

Close

Oyo is all set to file for an IPO in the next few days, Moneycontrol reported on September 23.

In July, Moneycontrol first reported that the company was aspiring for an IPO by the end of 2021.


Priyanka Sahay
first published: Sep 29, 2021 05:10 pm

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