Federation of Hotel & Restaurant Associations of India (FHRAI) which had filed a complaint against the company in the Competition Commission of India (CCI) said the investigation is ongoing and ‘many’ Oyo partners have indicated that they will approach Sebi and the finance ministry.
Oyo has mentioned about the ongoing CCI investigation in its DRHP.
“CCI is investigating the company. Many Oyo partners have indicated they will approach Sebi and the finance ministry. Hoteliers across the country have reported several cases about Oyo’s arbitrary cancellation or breach of contracts with us. Based on artificial and inflated valuations, the company promotes itself as a great Indian success story, and on the back of this, it tries to acquire more funding,” said Pradeep Shetty, joint honorary secretary, FHRAI.
Oyo did not respond to queries relating to any probable concerns which might have been raised by hoteliers post the DRHP filing, and the overall number of complaints filed and resolved against the company over the past one year till the time of going to press.
Mumbai hotelier Paramjit Singh Ghai said he has lodged a criminal complaint against founder Ritesh Agarwal and directors alleging ‘large scale’ cheating at the Khar police station in his two hotels Samrat and Hotel Singhs International in the city this month.
“Oyo is involved in a massive manipulation and suppression of sales figures as well as GST on a national scale. It will be a shame if this IPO is allowed. We have been able to uncover a lot of evidence and data which we have provided to the authorities,” said Ghai.
“We are also into arbitration proceedings at the Bombay High Court which Oyo is dragging for one and a half years. We have also filed impleadment application with 14 other hotels in the Supreme Court against the NCLAT order to close insolvency proceedings against Oyo and it will be heard on October 8,”he added.
Mona Agrawalla, who runs the Central Courtyard Resort in Siliguri had initially challenged NCLAT’s dismissal of an insolvency case against Oyo in the Supreme Court.
Agrawalla said she was under Oyo’s Smart hotel model where all the bookings were provided by them but management was under her.
“We tied up with Oyo in 2017. From January 2019 onwards, they started deducting huge penalties under different heads. Bookings would be made at much higher rates but the tab provided by them would reflect very basic rates,” she said.
“And on these basic rates, they would further charge their 12% commission, five types of penalties and transfer a meagre amount to us. We got extremely tired and frustrated and then filed a case in the Supreme Court against them. Our claim is of Rs 37 lakh but legal expenses are piling up,” she added.
Anand K Bhatia, who runs the Golden Swan hotel in Santacruz Mumbai said Oyo’s walking out of all MSA lock-in arrangements and thereby ending existing arrangements should be brought to the notice of the financial regulators. “We had a five-year lease contract with Oyo which was effective June 2019 to 2024. There was a strict clause which said there will be a three-year lock in. In March 2020, as soon as the lockdown started, they informed us they will stop paying rent and were invoking the force majeure clause,” he said.
“As per our agreement there was no force majeure clause. Subsequently, in October, out of the blue we got an email and call from them saying that with immediate effect we are withdrawing our staff and leaving the property,” he added.
Gurgaon hotelier Yogesh Kapur said he has filed a criminal complaint to the commissioner of police in Gurgaon against the company alleging manipulation in billing, issuing of invoices from his company to their associate company at lower rates and subsequently selling the rooms at higher rates and alleging unaccounted transactions.
He said the matter has been directed to the Economic Offences Wing. “I posed as a customer for my own hotel and booked a room for a certain amount. Oyo issued an invoice for a lower amount on our monthly data sheet,”he added. ET has a copy of the receipts being cited by Kapur.
In its DRHP, Oyo has stated a summary of outstanding litigation proceedings involving the company, subsidiaries, directors and promoters as also disclosed in outstanding litigation and material developments in terms of the SEBI ICDR regulations and the materiality policy adopted by its board pursuant to a resolution dated September 28.
It mentions the material litigation against the company and its subsidiaries as parties as four and criminal litigation as nil. It mentions action taken by statutory and regulatory authorities as two (for which amount is quantifiable only in respect of one proceeding out of the two). It lists 14 criminal litigation matters filed against its directors and states each of these proceedings are criminal proceedings initiated against its promoter along with certain parties as the case may be. The DRHP states the group companies are not party to any pending litigation proceedings which may have a material impact on the company. The DRHP states the company has filed 3220 complaints under section 138 of the Negotiable Instruments Act, 1881 against 573 parties for claims aggregating to approximately Rs 31 crore. “The matters are pending at different stages of adjudication before various courts,” it stated.
Oyo has also stated in the DRHP that it launched an ‘equal patron’ policy last year with the aim of ‘enhancing’ trust and collaboration with its hotel partners to drive business improvements. As per the DRHP, it also introduced a range of products in response to the feedback it received from its hotel partners such as Oyo Secure, a pre paid e wallet which helped to simplify the revenue collection and reconciliation process and improve the working capital flow for the company and its partners. The company claims these initiatives led to an increase in the partner satisfaction score to 72.3%.
But Vishamber Shewakramani, the owner of Rosewood Hotel and Rajdoot hotel in Mumbai said he was ‘shocked’ to learn that Oyo has filed for an IPO. “They have defrauded several hoteliers of their legitimate dues when they were in tie-up with them. Two of our hotels – Hotel Rosewood, Tardeo, Mumbai and Rajdoot Hotel, Cotton Green, Mumbai had several months of unpaid minimum revenue and revenue share. Without paying they abandoned both the hotels. Thereafter they had the audacity of blocking our ability to join the other OTA sales channels such as Makemytrip and Travelguru,” he alleged.
Nimpha Rodrigues, owner of Oceans 7 Hotels & Resorts said he had an arbitration matter in the High Court of Goa for a claim of Rs 3.5 crore and alleged Oyo breached the contract. “Oyo failed to honour its contracts with hoteliers. Its funding should be investigated by the authorities,” he said.