In the latest development in the on-going battle between Oyo and Zostel-owned Zo Rooms, the arbitration petition filed by Zostel in the District Court of Gurugram against OYO has been reportedly rejected for want of jurisdiction with the court as per order pronounced by the Court on February 23.
“We are delighted with the outcome which reinforces the faith entrepreneurs have in the judiciary. Zostel is taking an emotional route now after the dismissal of their petition,” an Oyo spokesperson said in a statement.
According to an Inc42 report, ZO Rooms has accepted the order. “Zo Rooms had filed a petition seeking injunctive relief before the Gurugram court which was declined on the grounds of lack of jurisdiction,” the report quotes Zo Rooms’ spokesperson as saying, adding that the court did not pass any order on the merits of the case.
Oyo filed a criminal complaint against the founders of Zostel on January 16, 2018, under Section 405, 406, 415, 420, 425 and 426 pertaining to Criminal Breach of Trust, Cheating and Misrepresentation of data.
Oyo initiated talks with Zostel in late-2015 to acquire its budget hotel segment Zo Rooms. Oyo had also signed a non-binding term sheet for the deal. However, the deal was terminated in September 2016 after Oyo claimed that it couldn’t identify potential value in their business.
Reports of the Oyo-Zo deal facing hurdles surfaced within days following which Zo Rooms pulled down its website around February 2016. But this only strengthened rumours of the merger.
Oyo now claims that Zostel and its directors have been inconveniencing and harassing Oyo for over a year, which led the company to file a complaint against Zostel.
“They are continuing their efforts to pressurize OYO to pay for an unviable business that Zostel shut down on its own in the absence of resources to further carry on its loss making operations. The non-binding agreement fell apart earlier and we stated in a statement that there was no real business to acquire. In addition Zostel was not meeting its obligations to clear significant dues from vendors and owners to move the diligence forward. Getting into a deal with this background would have been harmful for our reputation and our business,” Oyo said in a statement on Sunday.
Hostel chain Zostel Hospitality was founded in 2013 by Dharamveer Chouhan, Akhil Malik, Paavan Nanda, Tarun Tiwari, Chetan Singh Chauhan, Abhishek Bhutra and Siddharth Janghu. It entered into the budget hotel space with Zo Rooms in December 2014 and expanded to 51 cities by late-2015.
Oyo further added that it continues to pursue its criminal cases under section 379, 414, 420 and 120B of IPC filed in January 2018 and other implications under IT and Copyright Acts with the Economic Offences Wing & Cybercrime department, filed in 2015, against senior employees of Zostel for stealing data and other assets including laptops which continue to be under Zostel's access even now and being used to its benefit.