NCLT dismisses insolvency petition against OYO Hotels
The National Company Law Tribunal (NCLT) has rejected Mindmill Software’s application to initiate corporate insolvency resolution proceedings against OYO Hotels and Homes Pvt Ltd on the grounds that the amount claimed pending by the petitioner is disputed.
Mindmill Software Limited filed an application against OYO Hotels and Homes Pvt Ltd. to initiate Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC) over unpaid rent for office space. Mindmill Software claimed OYO owed them Rs. 1,83,60,100.01 in rent and associated charges for leased office space.
The petitioner claimed that OYO owed them Rs 1,83,60,100.01 in rent and associated charges for leased office space. OYO stopped paying rent in March 2020 and invoked the Force Majeure clause citing COVID-19.
According to the submission made by the petitioner, despite negotiations, OYO terminated the lease agreement in January 2021. Mindmill initiated arbitration proceedings to resolve the dispute but filed the insolvency petition concurrently.
OYO Hotels countered the claims of the petitioner by claiming that the termination invoked due to Force Majeure nullified the rent obligation for the lock-in period. It said that the dispute over rent was already under arbitration and simultaneous insolvency proceedings were inappropriate.
OYO Hotels cited cited various judgments supporting their stance. Those include Milkfood Ltd. v. GMC Ice Cream (P) Ltd. [(2004) 7 SCC 288]; Rajratan Babulal Agarwal v. Solartex India Private Limited [(2023) 1 SCC 115]; Deepak CP(IB) 28 of 2023 Modi v. Shalfeyo Industries Pvt. Ltd. [2023 SCC Online NCLAT 169]; Chandrashekhar Exports Pvt. Ltd. v. Babanraoji Shinde Sugar & Allied Industries Ltd. [2023 SCC Online NCLAT 495]; Pramod Yadav & Anr. v. Divine Infracon Pvt. Ltd. [2018 SCC Online NCLAT 312] vide his affidavit dated 1 November 2023 along with a written submission which have been taken on record.
Observation of the NCLT
The Tribunal observed that OYO had exercised its right to terminate based on a contractual clause. It further said in its order that the rental dispute was already under arbitration, making CIRP initiation inappropriate. “Concurrent arbitration and insolvency proceedings could amount to forum shopping,” it said.
Also See: Kirloskar Electric Company Ltd faces insolvency proceedings
