Zostel Hospitality Pvt Ltd has won a legal case in Arbitral Tribunal Court against Oyo. As per the court order, Oyo will transfer a 7% share to ZO room shareholders. Zostel hospitality firm owns Zostel Hostels and ZO Rooms, whereas Oravel Stays is the parent company of Oyo Rooms.
What is the Major Issue Between Oyo and ZO Rooms?
In 2015, Oyo and ZO were in talks related to mergers. As per the agreed terms and conditions, ZO fulfilled all requirements of the deal. Oyo had to transfer a 7% share to ZO investors. This term, Oyo never fulfilled.
Oyo explained that the deal was not finally signed so there is no point in transferring the share. On the other hand, ZO is claiming that It did all financial transactions required in the deal, then why Oyo will not transfer the share.
The current arbitral bench was led by former Chief Justice of India(CJI) A.M. Ahmadi on 6th March. He sent the document for binding.
“However, as Definitive Agreements have yet to be executed, the Tribunal holds that the Claimant is entitled to take appropriate proceedings for Specific Performance and execution of the Definitive Agreements as envisaged for itself and its shareholders under the term sheet.”
Talking about the old deal further, Zostel said that both parties executed the agreement on 26 November 2015. ZO Room abided by the contractual agreement to complete all required obligations but OYO failed. This forced Zostel to knock on the tribunal court door.
What is the Future of Current Court Verdict?
Now, Zostel is planning to carry the judgment copy to Oyo to fulfill the court order. In case of denial, the matter will be taken to the high court, said Zostel.
Oyo has a different story to tell. The company said that we are not entitled to transfer any shares to Zostel.
Oyo further added:
“The current arbitration hasn’t told us to transfer share. 2015 agreement was never executed. Both the parties did not fulfill the closing conditions. . there is no such signed agreement which says that Oyo has to transfer 7% share.”
“The final verdict allows Zostel to initiate further proceedings for the final agreement but on the ground, we have no clear evidence. Oyo will oppose any share transfer-related talk on all judicial platforms,” said Oyo.
If the current verdict is implemented, Zostel Hospitality’s seven founders will get a 7% stake in Oyo. Currently, Oyo has a share price of $58,490 after the F1 round of funding. It has a market value of $9 billion.
Other than that, the tribunal court also ordered Oyo to pay legal fees to Zostel for arbitration proceedings.