NCLAT questions the possibility of liquidating startups like OYO without assets on the ground
By the June 21 hearing, all claimants had filed their paper evidence in court, and these documents will now be subject to verification.
OYO had approached the Supreme Court on June 3, requesting an expedited hearing for its pending insolvency case in the NCLAT
OYO’s creditors had previously appealed for the settlement of contributions worth 250 Cr INR in NCLT
the National Company Law Appeal Tribunal (NCLAT), which is currently The hearing of an insolvency case against hotel unicorn OYO has raised concerns about whether the 2016 Insolvency and Bankruptcy Code (IBC) can be fully applied to startups with intangibles.
NCLAT is currently hearing an insolvency plea that was originally filed against a subsidiary of OYO named OYO Hotels and Homes Private Limited (OHHPL) by a hotelier named Rakesh Yadav in April under the Bankruptcy and Insolvency Code in NCLT. Yadav’s company, Yellow White Residency Hotel, requested the clearance of dues valued at INR 16 lakhs in its plea in court on April 1. However, Yadav had would have paid the disputed amount of INR 16 lakhs with OYO before the next hearing.
During the case, NCLAT held at least six hearings until June 8. During these two months, several former hotel partners of OYO came forward and filed complaints worth INR 250 Cr with the court which has yet to be verified by the court.
At the hearing held on June 21, all of the claimants had filed their invoices and paper supporting documents in court, and these documents will now be subject to verification by NCLAT. The IRP also submitted a list of creditors who have requested claims from OYO, according to an order document dated June 21.
“Respondent’s expert lawyer No. 2 / IRP filed the list of creditors (including financial, operational, workers and employees and other creditors) and collateral on 06.17.2021, which is registered,” said the prescription Inc42 reviewed.
However, during the hearing, the formation of the NCLAT noted that, with OYO being a startup with very few tangible assets, it is not clear whether the liquidation could take place.
“The NCLAT judges have expressed reservations about the conduct of an IBC proceeding on OYO… The judge expressed concerns about the advisability of pursuing a heavy IBC proceeding against a unicorn startup. The judge said that since internet startups from Ola and OYO derive their value from non-tangible assets, it is not clear how liquidations can take place, ”said a person familiar with the June 21 hearing asking to stay anonymous.
OYO Rooms did not respond to an email seeking comment from Inc42 until the publication of this article.
Interestingly, similar comments were made during a hearing in Delhi HC when a hotel partner working with OYO previously sued the hotel startup in June 2020 on the presumed non-payment of contributions. At that time, a bench led by the Delhi HC ordered OYO to file an affidavit detailing the unencumbered (debt-free) assets owned by the company. The order came in light of a case filed by the hotel company Anam Datsec, which had accused OYO of non-payment of dues for its Golden Sands property in Calangute in Goa and sought more than 8 Cr INR in damages and interests.
However, OYO has similar legal cases filed by other owners against it, seeking several crores in damages. At that time, Sameer Rohtagi, the lawyer representing Anam Datsec said mint that the total size of the alleged unpaid dues owed by OYO to many landowners disputing side cases could amount to a higher value than the actual value of the properties the startup currently owns, according to Rohatgi.
“By ordering OYO to file a statement of truth (affidavit) detailing the value of its unencumbered assets, the court verifies whether the company has sufficient cash in case it (OYO) could be asked to pay damages. during the arbitration process, ”Rohatgi said. mentionned.
Nevertheless, in the pursuit NCLAT, the court has now received requests for more than 40 ex-OYO hotel partners, however, these claims have yet to be verified through legal process. OYO too approach the Supreme Court recently accelerated the hearing date for its current insolvency hearing in the NLCAT.
In the course of the insolvency proceedings, the Federation of Hotel and Restaurant Associations of India (FHRAI), on behalf of the hoteliers and other independent hotel partners of OYO, has submitted claims valued of 90 Cr INR in court.
In an earlier statement from June 5, 2021, OYO said it “vehemently denies” any unverified claims made in the ongoing insolvency resolution process with NCLAT. Currently, the NCLAT case is adjourned until June 23, 2021.
OYO further underlined that the interveners have “no locus (standi) in this matter” and that the contested claims are not grounds for intervention. “The company has also denied the unverified and baseless rumors made around the monetary claims involved in the case,” added the hotel startup.
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