OYO asks govt to probe FHRAI's 'illegally-run' executive committee

Claims committee's actions hurting small hotel owners; constant friction with organised players discouraging SMEs and entrepreneurs from moving ahead with the times and with technology

IPO-bound hospitality major OYO has written to the Ministry of Tourism (MoT) requesting it to intervene and investigate the running of the Federation of Hotel and Restaurant Associations of India (FHRAI) and order eviction of erring executive committee members.

The hotel aggregator urged the MoT to take necessary action against FHRAI’s “illegally run” Executive Committee and its members who are working for self-interest instead of that of small hotel owners.

The representation by OYO alleged that FHRAI’s actions are detrimental to small hotel owners. It also claimed that the industry body's “constant tussle and continued malafide friction with organised players like OYO discourages SMEs and entrepreneurs from progressing and moving ahead with the times and with technology”.

Responding to the allegations, Jaison Chacko, Secretary General of FHRAI, said, “It would have been desirable if OYO would have tried to counter FHRAI's allegations and tried to clear the pending dues of hundreds of hotel partners."

Chacko claimed that the FHRAI approached appropriate authorities including the CCI, NCLT, NCLAT, SEBI and Government of India against OYO’s “oppressive and unethical business practices” based on an “enormous number of complaints received from our members about large scale breach of contracts, default of payments, unilateral cancellation of agreements and other fraudulent activities committed by OYO”

The National Company Law Tribunal's (NCLT's) principal bench recently directed the Ministry of Corporate Affairs (MCA) to examine FHRAI's affairs and ensure that it complies with the provisions of the Companies Act.

The order stated this was necessary as a series of litigation had spawned due to the manner in which FHRAI was conducting its affairs. The tribunal also ruled that “personal interest has come to loom over the functioning of FHRAI and this has to be curbed”.

OYO’s letter recounts the findings and the order passed by the NCLT’s principal bench, which observed: “The object of the FHRAI is to promote the interest of hotels of various regions by encouraging and protecting the hospitality industry in India has been defeated due to petty squabbles time and again. Personal interest has come to loom over the functioning of FHRAI. Certain members of various regions of FHRAI are breeding litigation for personal reasons and we strongly disapprove of it.”

“Aggregators like OYO have only enabled the industry in India over the last decade and new-age players have democratised travel, made hotels and homes more accessible to guests from around the globe,” the letter read.

“But the present governing body members of the FHRAI, are running a deleterious and malicious agenda aimed towards ruining the interest of hotel industry at large, and creating hurdles and bottlenecks for new players in the market, who are posing a stiff challenge to the self-serving agenda of certain members of the FHRAI with vested interest,” it added.

The National Company Law Appellate Tribunal (NCLAT) recently delivered a verdict on an appeal, dated August 30, 2022, by the Hotel and Restaurant Association of Northern India (HRANI) and the Hotels and Restaurants Association of Western India (HRAWI).

The verdict declared all administrative decisions by the current executive committee null and void and asked FHRAI to conduct fresh elections in 30 days.

“We further find the acts of some members of the executive committee, who have formed a “clique” to give shape to their chosen but perverse design, are clearly acts of “oppression and mismanagement”, the NCLAT ruling said.