SUMMARY
Hospitality company Anam Datsec sought more than INR 8 Cr in damages
The complaint alleged that OYO did not provide necessary and accurate revenue statements
It also alleged that OYO failed to construct seven rooms, a lift and swimming pool in over 1.5 years
Gurugram-based hospitality unicorn OYO Hotels and Homes has found itself in yet another legal tangle. In an order by the Delhi high court (July 7) OYO has to file an affidavit by July 21 on its unencumbered (debt-free) assets.
The order came in the light of a case filed by hospitality company Anam Datsec, which has accused OYO of non-payment of dues for its Golden Sands property at Calangute in Goa and sought more than INR 8 Cr in damages.
On the matter, an OYO spokesperson told ET that the court had given it two weeks’ time to file its reply to the petition. “It is to be noted that no interim relief has been granted by the Delhi High Court to the petitioners,” an OYO spokesperson said. The matter has now been listed for August 20.
In a legal notice issued on May 15, as seen by Inc42, Anam Datsec claimed that OYO had agreed to pay INR 14 Lakh a month as the minimum guaranteed amount when it entered into a management services agreement with the company for the property in 2018. It said OYO did not also provide necessary and accurate revenue statements and carried out “substandard and hazardous construction” on the property.
The complaint also noted that as per the master service agreement (MSA), the hotel was liable only to bear the costs towards the additional 7 rooms but the construction costs were that of OYO, which it has failed to construct in over 1.5 years. It also alleged that OYO failed to construct a lift and swimming pool for the hotel.
The complainant, in its legal notice, had demanded INR 84,68,436 towards minimum guarantee, INR 2,24,355 towards interest and penalty to statutory authorities, INR 2 Cr as damages due to improper construction leading to demolitions, INR 3 Cr towards penalty for deficiency of services and INR 8 Cr as lost opportunity costs.
The legal notice had demanded a response within seven days, but considering the court order, it appears that the notice didn’t settle the complaint. Inc42’s queries to OYO on the matter remain unanswered till the time of publication.
It is to be noted that OYO has been under the line of fire for non-payment of its dues time and again, especially since 2019, where it has been pulled into several legal proceedings. Recently, in Inc42’s Ask Me Anything session, OYO founder Ritesh Agarwal said that the company is working to fix its scale-related problems.
On the hoteliers’ side, the company is fixing revenue complaints as well as reconciliation timelines, he added. Agarwal is confident that OYO is chosen for occupancy lift, technology systems for operations, and revenue management practices. He added that 43K hotel owners and 50K homeowners have seen occupancy lift.
OYO chief is of the belief that the company didn’t clearly communicate the revenue part of the deal. Agarwal explained that usually hoteliers stick to a certain price point and are ready to sacrifice occupancy for the same. Here, OYO brings its service by offering varying price points to lift occupancy and bring a similar or more revenue.
On the accounts reconciliation front, OYO has now trained business development executives to be able to reconcile books with the hotels directly, instead of going to the company’s accounts or finance department.
But after months of positive media conversations and promised upheaval, how OYO resolves this issue remains to be seen.
Update: July 10, 2020| 15:05
After the story was published, a OYO spokesperson told us that the Delhi High Court after hearing OYO’s submissions was pleased not to pass any interim order in the matter and rather has given OYO time to file its reply to the Section 9 petition filed by Anam Datsec within two weeks and Anam Datsec has been given another two weeks’ time to file the rejoinder.
“The Delhi High Court has permitted the concerned OYO entity’s affidavit of assets to be kept in a sealed cover by the Registry of Delhi High Court, which is also a basis statement made by OYO itself on its own financial standings….During the hearing on 07 July 2020, OYO has already shown the Court pictures demonstrating the transformation of the hotel property on account of the construction carried out by OYO to substantiate that the case of the Petitioner is not made out. In any event, OYO has also submitted to the Court that the dispute may be resolved amicably between the Parties or through Arbitral Forum as agreed between the Parties in the Contract signed by them,” the spokesperson added.
