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Tuesday, April 20, 2021

Explained: Why has OYO moved NCLAT challenging insolvency plea against a subsidiary?

The Ahmedabad bench of NCLT had on April 1 admitted an insolvency plea against OHHPL after a creditor approached the tribunal claiming a default of Rs 16 lakh

Written by Aashish Aryan , Edited by Explained Desk | New Delhi |
Updated: April 8, 2021 8:14:21 am
Oyo Hotels founder Ritesh Agarwal. Photographer: Akio Kon/Bloomberg

Hospitality chain OYO has approached the National Company Law Appellate Tribunal (NCLAT) against an order of the Ahmedabad bench of the National Company Law Tribunal (NCLT) admitting an insolvency petition against OYO Hotels and Homes Private Limited (OHHPL), a subsidiary of the parent group.

The NCLT admitted the petition of a supplier who claimed to have not been paid Rs 16 lakh by OYO.

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What is the case?

The Ahmedabad bench of NCLT had on April 1 admitted an insolvency plea against OHHPL after a creditor approached the tribunal claiming a default of Rs 16 lakh. The NCLT admitted the plea and appointed an interim resolution professional to manage the day-to-day proceedings of the company. It had then also asked all creditors to submit their claims with proof on or before April 15.

The initiation of insolvency against the subsidiary led to incorrect reports claiming that the entire OYO group had filed for insolvency.

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Oyo’s plea?

On Wednesday, Ritesh Agarwal, the group chief executive officer of the hospitality chain, denied the reports and said that a claimant had sought Rs 16 lakh from its subsidiary, which led to the case at NCLT.

“OYO has paid that under protest and amount already banked by the claimant. OYO has also appealed with the NCLAT about the matter,” Agarwal said in a tweet.

In a statement later, though the company said it was surprised that the NCLT had admitting a petition against OHHPL for a contractual dispute, it also said that it would “refrain from commenting further on the merits of the matter” since the matter was sub-judice.

Founded in 2013 as a way to reserve budget accommodations online with reliable quality, OYO soon became a benchmark in budget hotel room bookings across the country. Flush with funds from Japan-based Softbank Group Corp, the platform had been on an aggressive global expansion scheme, before being halted by the outbreak of the Covid-19 pandemic and the subsequent lockdowns.

In his tweet on Wednesday, Agarwal also said that the company was recovering from pandemic steadily and its largest markets were “operating profitably”.

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