The National Company Law Appellate Tribunal (NCLAT), on April 8, ordered a stay on the formation of a Committee of Creditors (COC), as per the Indian Bankruptcy Code (IBC) 2016, against Oyo Hotels and Homes Pvt Ltd (OHHPL), an OYO subsidiary.

The Softbank-backed hotel chain tweeted, "Today NCLAT has admitted our plea and ordered a stay for the formation of COC in IBC proceedings against OHHPL, an OYO subsidiary."

Closing @riteshagar's thread from yesterday - Today NCLAT has admitted our plea and ordered a stay for the formation of COC in IBC proceedings against OHHPL, an OYO subsidiary. The claimant has already drawn the INR 16 Lakhs which we paid under protest. pic.twitter.com/hNkevbWbWs

— OYO (@oyorooms) April 8, 2021The National Company Law Tribunal (NCLT) had admitted a petition for insolvency proceedings under the IBC, against the OHHPL on March 30. The plea was filed by a Gurugram hotelier who alleged defaulting on payment and violation of an agreement to maintain the property under the brand OYO.

In its order, the NCLAT had asked all creditors of OYO's subsidiary to submit its claims by April 15. The OYO group filed an appeal before the NCLAT challenging this order on April 7.

In a statement OYO said, "The NCLAT provided a stay for the formation of COC in IBC proceedings against OHHPL, subsidiary of OYO. OHHPL appealed the order in front of NCLAT and explained that a demand draft of INR 16L was issued to the claimant under the protest and the claimant has willingly banked the DD."

The rumour of the hospitality unicorn going bankrupt went viral on social media on April 7. OYO's founder and CEO Ritesh Agarwal, in a series of tweets, clarified that the order (of the NCLT) was related to a Rs 16 lakh payment dispute of a subsidiary which has been paid 'under protest' and an appeal has been filed.

In another tweet Ahmedabad-based Keyur Shah, the Interim Resolution Professional, clarified that the insolvency proceeding was not against the OYO group. Shah said in a tweet, "I am acting as Interim Resolution Professional in the present case. As stated by @riteshagar the application was filed by one operational creditor u/s 9 of the IBC, 2016 and not by @oyorooms."

There is a PDF and text message circulating that claims OYO has filed for bankruptcy. This is absolutely untrue and inaccurate. A claimant is seeking INR 16Lakhs (USD 22k) from OYO's subsidiary leading to a petition at NCLT. 1/3

— Ritesh Agarwal (@riteshagar) April 7, 2021

Our bankruptcy code, however, allows an operational creditor to drag a company to the NCLT for insolvency resolution over unpaid dues.

Founded in 2013, the budget hotel room booking platform, was badly hit by the outbreak of the COVID-19 pandemic and the subsequent lockdown. To remain afloat during the lockdown period, the hotel chain resorted to salary cuts, furloughs and voluntary resignations of employees.

However, in February 2021, the company announced that "It’s on the path to recovery".