Supreme Court refuses to entertain Zostel plea against Delhi High Court ruling in Oyo dispute

The Supreme Court on Tuesday refused to entertain an appeal filed by Zostel Hospitality challenging a Delhi High Court judgment that had set aside a 2021 arbitral award against Oravel Stays, the parent company of hospitality platform Oyo [Zostel Vs Oravel Stays].

A Bench of Justices Sanjay Kumar and Satish Chandra Sharma observed that Zostel ought to have filed an appeal under Section 37 of the Arbitration and Conciliation Act instead of approaching the apex court by way of a special leave petition under Article 136 . Following these observations, Zostel withdrew its petition.

The petition arose from a May 2025 judgment of the Delhi High Court in which Justice Sachin Datta set aside an arbitral award that had held Oyo liable for breaching a binding agreement in its acquisition of rival Zostel.

The long-running dispute between the two hospitality startups goes back to a 2015 agreement under which Oyo proposed to acquire Zostel’s hotel business. In return, Zostel’s shareholders were to receive a 7 percent equity stake in Oyo. The term sheet while described as non-binding except for clauses on confidentiality, exclusivity and dispute resolution, outlined steps including transfer of assets and signing of definitive agreements.

Zostel claimed it had transferred its business and personnel to Oyo, thereby fulfilling its obligations but Oyo failed to execute the definitive agreements allegedly due to resistance from a minority investor, Venture Nursery. In 2018, Zostel initiated arbitration proceedings.

On March 6, 2021, a former Chief Justice of India—acting as sole arbitrator—held that Zostel was entitled to specific performance of the transaction outlined in the term sheet.

However, the tribunal declined to direct allotment of shares, citing lack of complete consensus on the terms of the definitive agreements. It instead left open the possibility for Zostel to initiate appropriate legal proceedings to enforce its rights.

In 2021, Zostel moved the Delhi High Court under Section 9 of the Arbitration Act seeking to restrain Oyo from altering its shareholding—including via a proposed IPO—on the ground that such actions would render the arbitral award unenforceable.

However, on February 14, 2022, Justice C Hari Shankar dismissed the plea, holding that the arbitral award did not crystallise into any enforceable right to shares and that there were no “fruits” of the award warranting protection under Section 9.

Justice Hari Shankar further ruled that there was no binding restriction preventing Oyo’s IPO and no infringement of rights under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

Justice Sachin Datta’s judgment on the Section 34 petition subsequently set aside the arbitral award in its entirety, prompting Zostel to move the Supreme Court.

Senior Advocate Abhishek Malhotra appeared for Zostel along with advocate Sonal Chhablani.

Senior Advocate Mukul Rohatgi appeared for Oyo assisted by advocates Anuradha Dutt, Lynn Pereira, Suman Yadav, Haaris Fazili, Kunal Dutt, Raghav Dutt, Avinash Singh, Keshav Sehgal and Prachi Pandey from DMD Advocates and Solicitors.