OYO Prevails in Legal Dispute with Zostel

OYO has emerged victorious in a protracted legal battle with Zostel Hospitality, the parent company of ZO Rooms, as the Delhi High Court has annulled an earlier arbitral award. This ruling clarifies that OYO did not violate any contractual agreements during the failed acquisition negotiations with Zostel.

Key Findings from the Court

The court confirmed OYO’s stance that it did not acquire any segment of Zostel’s operations. Additionally, it stated that the type of agreement they entered into could be cancelled and thus lacks legal enforceability. Zostel’s appeal to adhere to the prior arbitration order was also dismissed by the High Court.

Background of the Dispute

This conflict dates back to November 2015, when OYO and Zostel entered into a non-binding, exploratory term sheet concerning a potential acquisition. The negotiations, however, fell apart due to unsuccessful due diligence and an inability to finalise crucial terms.

Arbitration Initiation and Ruling

In September 2018, Zostel sought arbitration—nearly three years post-negotiations—which culminated in a March 2021 arbitral award that OYO contested immediately. The Delhi High Court had already denied Zostel’s request for an injunction in February 2022.

Final Resolution

The latest ruling provides a definitive closure, asserting that no binding agreements were established and no agreement on key commercial aspects was achieved. An OYO representative remarked that this outcome supports their longstanding position regarding the absence of any enforceable agreement between the involved parties.

Impact on OYO’s IPO Plans

Nonetheless, it has been reported that OYO postponed its anticipated October IPO earlier this month following pushback from its primary investor, SoftBank. This IPO consists of a new issuance valued at Rs 7,000 crore, alongside an Offer for Sale (OFS) amounting to Rs 1,430 crore.