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SoftBank funded budget hospitality chain OYO has filed a criminal complaint against the founders of Zostel last month, alleging breach of trust, cheating and misinterpretation of data. OYO was in talks to acquire Zostel’s budget hotel business Zo Rooms since 2015 but later saw little value in the acquisition of this Tiger Global funded company.
OYO, the country’s biggest budget hospitality chain, has alleged that Zostel and its directors have been ‘continuously’ harassing the company for over a year. “They've used every tactic, from sending letters carrying false allegations to OYO's management to writing to our shareholders, for intimidating and pressurizing us to submit to their unreasonable demands,” an OYO spokesperson said in a statement without elaborating what these demands are. The criminal complaint was filed on January 16, 2018 at the Delhi High Court.
OYO spokesperson said Zostel has tried to arm twist and ‘blackmail’ the company and its investors to execute the deal without having a ‘real business’ or even a binding agreement at hand and ‘threatening’ us through legal routes. The statement said Zostel has filed a ‘misconceived and baseless’ arbitration petition in the Gurgaon Court on February 2, 2018. OYO said the allegations relate to a long-expired and non-binding term sheet. OYO has claimed that it did not get any benefit from talks of the deal with Zostel. The term sheet expired in September 2016. OYO claims that there was no response from Zostel on a list of issues, including the liabilities, unpaid dues and undisclosed contingent liabilities, raised during the diligence process.
“Getting into a deal with this background would have been harmful for our reputation and our business. OYO ultimately saw little value in Zostel's business and there was a significant loss of trust,” the OYO spokesperson said. OYO alleges that while Zostel claims it has been willing to do the deal it shut down the app and web site giving neither us nor their customers or owners any prior notice. It was impossible for Zostel to ever effect any customer migration leave alone a smooth business transfer which was key to the deal discussion, OYO maintained.
This is not the first legal fight between OYO and Zostel. Before OYO started talks with Zostel it had filed criminal cases against the latter at the Economic Offences Wing & Cybercrime department. OYO had then alleged that Zostel stole data and copyright material for use in its business.