Public Policy Prevails: Delhi High Court Quashes Arbitral Award In OYO-Zostel Case
The Delhi High Court Rules Arbitral Award Against OYO Violates Public Policy, Sets Aside 7% Stake Claim in Favor of Zostel
By: : Kashish Singh
Update: 2025-05-19 06:15 GMT
Public Policy Prevails: Delhi High Court Quashes Arbitral Award In OYO-Zostel Case
The Delhi High Court Rules Arbitral Award Against OYO Violates Public Policy, Sets Aside 7% Stake Claim in Favor of Zostel
The Delhi High Court rules that an arbitral award passed in 2021 in favor of Zostel Hospitality Private Limited against Oravel Stays Private Limited (OYO) violates public policy. The court set aside the award, which had upheld Zostel's claim to a 7% stake in OYO. The bench presided by Justice Sachin Datta delivered the verdict, stating that the 2015 Term Sheet between the two entities was expressly non-binding and could not be enforced.
The dispute arose from a Term Sheet executed on November 26, 2015, between OYO, Zostel, and certain Zostel shareholders. The document contemplated OYO's acquisition of Zostel's assets in exchange for Zostel shareholders receiving a 7% equity stake in OYO. However, the Term Sheet expressly stated that it was non-binding, except for specific clauses.
The arbitral tribunal had found that while the Term Sheet was labeled non-binding, the conduct of the parties made it enforceable. However, the Court rejected this reasoning, holding that the award was unsustainable in law and conflicted with fundamental principles governing contractual enforceability.
The court also faulted the arbitral tribunal for failing to decide the principal relief sought, namely the issuance of 7% equity shares to Zostel's shareholders. The court stated that, “For the above reasons, the impugned award is in conflict with the ‘public policy of India’ and is, consequently, liable to be set aside."
In this case the petitioner was represented by Mr. Mukul Rohtagi, Senior Advocate along with Ms. Anuradha Dutt, Mr. Lynn Pereira, Ms. Suman Yadav, Mr. Haaris Fazili, Mr. Kunal Dutt, Mr. Raghav Dutt, Mr. Keshav Sehgal, Mr. Avinash Singh, Ms. Seema Mehta and Ms. Prachi Pandey, Advocates. Meanwhile the respondent was represented by Mr. Abhishek Malhotra, Senior Advocate, Ms. Srishti Gupta, Mr. Kartikay Dutta, Mr. Raghav Shukla, Ms. Anukriti Trivedi and Ms. Sonal Chhablani, Advocates.