Supreme Court junks Zostel's plea against Oyo in arbitration dispute

The Supreme Court refused to admit Zostel's plea against a Delhi HC order favouring Oyo in a stake dispute, advising it to file an appeal instead of a special leave petition

The Supreme Court on Tuesday refused to accept Zostel Hospitality’s plea seeking to set aside a Delhi High Court order in favour of Oravel Stays, the parent company of Oyo.

 

An apex court bench of Justice Sanjay Kumar and Justice Satish Chandra Sharma said that Zostel should have filed an appeal in the high court instead of approaching the top court by way of a special leave petition.

 

Zostel then withdrew its petition.

 

The Delhi High Court in May this year had set aside an arbitral award entitling Zostel up to a 7 per cent stake in Oravel Stays. Zostel had appealed against this order in the Supreme Court.

 

 

A single-judge bench of Justice Sachin Datta of the high court in May had delivered the order on the plea filed by Oyo under Section 34 of the Arbitration and Conciliation Act, 1996. Section 34 outlines the procedure for a party to challenge an arbitral award in court.

 

In an award passed on March 6, 2021, the arbitral tribunal ruled that Zostel was entitled to specific performance of Oyo’s obligations under the term sheet but did not order allotment of shares.

 

It, however, allowed Zostel to pursue proceedings for the execution of the definitive agreements. The arbitral tribunal had ruled that Oyo acted in breach of a binding agreement after it acquired Zostel Hospitality, which owned ZO Rooms.

 

According to the agreement, Oyo had agreed to transfer 7 per cent of Oyo to ZO Rooms’ shareholders, the tribunal had said.

 

Oravel Stays and Zostel Hospitality, then rivals in the hospitality sector, had a legal dispute, notably involving a proposed buyout deal.

 

Zostel initially accused Oyo of failing to transfer a 7 per cent stake as per an agreement. Later, Zostel also raised concerns about Oyo’s draft red herring prospectus related to its initial public offering. Oyo, in response, refuted all the allegations and stated that the deal was terminated by mutual agreement.

 

Zostel then approached the Delhi High Court under Section 9 of the Arbitration and Conciliation Act, 1996, seeking to restrain Oyo from altering its shareholding, including via its proposed initial public offering (IPO), on the ground that it would frustrate enforcement of the arbitral award.