In fresh trouble for IPO-bound Oyo, rival Zo Rooms which has been fighting a legal battle with Oyo has filed an appeal in the Delhi High Court seeking protection of its rights against the company.
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 merger talks between the two companies failed.
At a time when Softbank-backed Oyo is preparing to file the draft prospectus for its initial public offering, Zo has approached the High Court seeking redressal.
“The award dated March 6, 2021, clearly holds that the Term Sheet between OYO and Zostel was a binding contract. It also holds that while Zostel performed all its obligations under the Term Sheet and transferred its business to OYO, however, OYO breached the contract by not executing the Definitive Agreements and not transferring the 7 percent shares to the shareholders of Zostel, as committed,” Zo’s legal counsel told Moneycontrol.
Condemning Zostel’s move Oyo in a blog published late on Tuesday night said, “After multiple attempts in the courts and arbitration tribunal, Zostel’s communication shows unnecessary and repetitive efforts to create a wrong perception. This shows a pattern of Zostel trying to distract Oyo from pursuing its business goals. Oyo is willing to utilize the resources in law to protect its interests.”
“Zostel had attempted similar subversive tactics in August 2021 by filing a barrage of petitions in the Delhi High Court even while its previous petitions seeking similar relief were pending. Specifically, Zostel had received a notice as part of OYO’s Section 34 appeal and yet has gone ahead and filed under Section 9 for interim relief. The repeated reliefs being sought are not consistent with an award by the Arbitration Tribunal from March 2021 which has not granted any award for issue of any shareholding in OYO to Zostel,” it added.
The two companies had entered into talks for an acquisition in 2015 executing an agreement on November 26.
Zo claims that it completed its obligation under the agreement and transferred the business but Oyo “failed to transfer seven percent to its shareholders” which eventually led to the arbitration.
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