Oyo gets flak from hospitality industry body after it slaps penalty worth crores, cuts ties abruptly with hotelier

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The Federation of Hotel and Restaurant Associations of India (FHRAI) has come out in support of Chandigarh-based hotelier, Vikas Gupta who has lodged a first information report (FIR) against Ritesh Agarwal, founder of Oyo.

In the FIR, the hotelier has stated that the Oyo’s top management abruptly exited a business agreement with "criminal intent".

According to FHRAI close to 100 hoteliers have encountered similar conduct from Oyo as soon as the COVID-19 pandemic hit businesses.

“Disruptions caused by the pandemic have affected businesses everywhere, but Oyo now has resorted to manipulating agreements to coerce hoteliers out of it. It is evident in Vikas Gupta’s case Oyo could not keep its commitment in the agreement. So instead of trying to work a way out, it just tried to use brute force to abandon the hotelier. Not only did Oyo decide to abandon a business going through its worst phase, it further tried to intimidate the hotelier with penalties running into crores,” said Gurbaxish Singh Kohli, vice president of FHRAI and president, Hotel and Restaurant Association of Western India.

According to the Chandigarh-based hotelier, Oyo sent him a notice on March 16, to submit non objection certificate and other documents.

"With this notice, I was given just 15 days to comply, whereas according to the agreement the notice time to be provided is 60 days. I was told to submit the same documents which were submitted at the time of signing the agreement. Yet as a responsible venue partner, I resubmitted the documents within the  specified time period. After this, to my utter shock, instead of paying me damages for illegal backing out of the agreement, a new notice levelling criminal conspiracy was sent and I was asked to pay roughly Rs 5 crore in penalties. After terminating the contract abruptly and illegally from their end during the period of lockdown, Oyo forged emails and accepted quite a few bookings from the market for the upcoming season till Dec 2020," said Gupta.

Oyo is already being investigated by Competition Commission of India (CCI) following complaints filed by FHRAI last year.

Following COVID-19, Oyo is learnt to have invoked force majeure to renegotiate contracts with many hotels.

"Firstly, we would like to clarify that this matter is pertaining to a banquet hall that was part of the portfolio of OYO's Weddingz business, and not a hotel. Having said that, OYO Hotels & Homes and all its businesses including Weddingz.in have always maintained the highest level of integrity, transparency and commitment to its venue partners. OYO at all times follows the laws of the land and operates keeping in mind the best interests of its venue partners, customers and employees. OYO has and will continue to refute baseless and publicity-oriented claims made against the company’s founder and other executives. In the present issue both the parties have agreed to the arbitration clause and have, as a matter of fact, accordingly nominated/proposed arbitrators vide their arbitration notices dated April 24 issued by OYO’s counsel and dated May 22 responded by the Venue Partner through his counsel. Disputes between the contracting parties are civil and commercial in nature and there is no criminality involved. Any disputes between the parties ought to be adjudicated by a duly appointed arbitral tribunal in accordance with the terms of the agreement between the parties and rules prescribed under The Arbitration Act. In spite of the same, such frivolous FIRs in matters that are essentially civil disputes are filed against reputed CEOs, young Indian entrepreneurs damage the global reputation of OYO Hotels & Homes and India as a destination for global business," said an Oyo spokesperson.