Zostel says it is in possession of evidence that sensitive data pertaining to hotels, employees, customers, analytics and passwords was handed over to Oyo.

Oyo vs Zo court battle heats up Zostel claims Oyo never filed fresh criminal complaint
Atom Legal Battle Friday, March 02, 2018 - 22:57

For a deal that never went through, the Oyo-Zostel battle has now reached the courtroom. Oyo alleges criminal breach of trust, cheating and has filed a criminal complaint against Zostel-owned Zo Rooms.

According to Oyo, during the process of due diligence, there was no response to a list of issues identified by it, including significant liabilities and unpaid dues as well as undisclosed contingent liabilities. Oyo claims that getting into a deal with this background would have been harmful for its reputation and business. 

But Zostel, on its part, claims that Oyo did acquire its business, properties, customer data, analytics, access and even passwords. It claims that Oyo is now using its strong financial and PR muscle to muzzle its voice and hide behind technicalities to buy time to avoid telling the truth.

Responding specifically to Oyo’s statement of the court rejecting Zostel’s petition, the latter says that the judge only said that Gurugram is not the right jurisdiction to file the petition and it is a wrong forum and didn't comment on the merit of the case.

While Oyo refers to the petition as arbitration, Zostel says it is a Section 9 petition to freeze Oyo's 7% equity and seek certain injunction orders against use of confidential arbitration and not an arbitration petition.

“It is pertinent to note that arbitration has not yet commenced as even an arbitrator as contemplated under the Term Sheet between Zostel and Oyo has not been appointed yet,” Zostel says.

Now that Oyo claims that the deal didn’t make economic sense, Zostel is confident of the evidence it possesses against Oyo. “It is only a matter of time when the entire barrage of evidences of the business transfer including properties, employees, data, future bookings, data, access pass codes would come out in front of the judiciary,” Zostel’s counsel says.

Zostel also claims that no fresh complaint was filed by Oyo against Zostel.  “Amidst the hue and cry going around the criminal complaint filed by Oyo, it is clarified that no new complaint has been filed by Oyo against Zostel. The frivolous complaint which was filed by Oyo way back in 2015 has again been brought into the media to tarnish the reputation of Zostel and people associated with it. The said complaint is frivolous and Oyo is trying to gain undeserved favours in the eyes of the public,” Zostel said.

It further adds that the numerous afterthoughts stated by Oyo for not going ahead with the deal were never raised in the past two years.

As Oyo continues to state that the deal didn’t make economic sense and that there was no business to acquire, what is Zostel’s side of the story?

According to Zostel, after founding Zo Rooms, this venture was expanded to 52 cities, 12 offices, 800 hotels and 700 employees in 1.5 years.

In November 2015, it held talks with Ritesh Aggarwal and signed off a Term Sheet with Oyo to acquire its business in return for 7% ownership in Oyo. This was approved by investors on both sides.

For the next three months, Zostel claims that each and every team member of Zo Rooms worked with Oyo's team in different cities to transfer every inch of the business.

As against Oyo’s claims, Zostel claims that Oyo Rooms acquired its partner hotels across all cities, employees, the entire customer data, future bookings, analytics, access and passwords.

“In order to ramp up its tactics, Zostel, as a part of its counter strategy has filed a misconceived and baseless Section 9 arbitration petition in the Gurugram court on February 2, 2018, making false allegations against OYO, including but not limited to allegations around various hotel, employee and consumer asset transfers. These allegations relate to a long expired and non-binding term sheet,” Oyo earlier said in a statement.

However, Zostel is in possession of evidence that suggests that sensitive data pertaining to hotels across all cities, employees, the entire customer data, future bookings, analytics, access, and passwords was handed over to Oyo.

“We organised mass meetings between Ritesh Agarwal, their HR team and core team members with our employees, who then handpicked them in big numbers to join Oyo. It was not an exercise done at a founder or core team level, but rather almost each one of our employees has played their part in efficiently transferring our business, spread across the length and breadth of the country to Oyo by Feb 2016,” Zostel claims.

According to Zostel, with reports of SoftBank announcing its acquisition all across the media and final agreements on the table for signatures, in February 2016, Oyo suddenly, after getting Zo to even buy stamp papers to allocate shares, came up with a request for a slight delay in share allocation owing to some internal investor issues.

“From that time till mid-2017, Oyo kept us engaged citing one excuse after another to delay our dues after we performed our duties pertaining to the deal. However, given Ritesh's assurances and credibility of names involved, we waited patiently, while copies of various definitive documents kept flowing between us and their officers,” Zostel says.

In October 2017, Oyo outrightly declined to issue Zo 7% shares of Oyo as per the deal. Zostel claims that the business had been acquired 1.5 years ago by Oyo, which now suddenly said that the deal didn’t make economic sense after ‘careful evaluation’.

“Zostel has time and again stated that it had transferred its entire business, in good faith, to Oyo under the Term Sheet signed by them. Once the entire business was transferred and Zostel was left with empty hands, Oyo decided not to fulfil its part of the obligations and to sign the definitive agreements as contemplated in the Term Sheet,” Zostel says.