⁠Zostel Drops Urgent Plea Against OYO In Delhi HC; Parent Company Slams 'Frivolous' Litigation

The Court granted Zostel liberty to approach it again at an appropriate stage, while declining to intervene in SEBI's consideration of the complaint at this stage. The Court observed that the market regulator could examine Zostel's objections in accordance with law.

Zostel had approached SEBI alleging that PRISM's draft offer document did not adequately disclose its long-running dispute with Zostel and the latter's claimed entitlement to nearly 7% of PRISM's equity.

The Court noted that PRISM's draft offer document had not yet received SEBI's regulatory clearance and indicated that Zostel's objections should first be considered by the regulator.

Following the hearing, Zostel said it withdrew the application based on the Court's observations.

"Accordingly, Zostel withdrew its application at this stage, with liberty to approach the Court at the appropriate time. Zostel's rights and remedies remain fully reserved and unaffected," the company said as per reports.

Zostel added that the substantive dispute with OYO continues to remain pending before the Delhi High Court and said it remains confident of its case on merits.

Dispute dates back to proposed 2015 OYO Zostel acquisition

The dispute between the parties dates back to 2015, when OYO had proposed acquiring Zostel's business. The transaction did not materialise as originally envisaged.

Zostel has since maintained that it is entitled to a stake equivalent to nearly 7% of OYO, now operated through PRISM, arising from the proposed transaction.

PRISM, however, has maintained that the term sheet executed between the parties was non-binding and exploratory and that there was no concluded agreement requiring it to transfer shares to Zostel.

The dispute has resulted in multiple proceedings before various courts and forums, including the Delhi High Court and the Supreme Court.

In May 2025, the Delhi High Court set aside the arbitral award that had formed the basis of Zostel's claims, holding that the parties' term sheet was largely non-binding and that specific performance could not be granted in the absence of definitive agreements on essential commercial terms.

Zostel's challenge against that judgment is pending before the Delhi High Court.

Zostel raises objections over PRISM IPO disclosures

The latest proceedings arose after Zostel approached SEBI seeking scrutiny of PRISM's IPO disclosures.

Zostel alleged that the updated draft red herring prospectus did not adequately or accurately reflect the nature and potential implications of the ongoing litigation and its claim to a stake in the company.

Zostel sought corrective disclosures before the IPO process progressed further.

PRISM has meanwhile moved ahead with preparations for its proposed public issue. The company has received SEBI approval to proceed with its IPO process and had filed draft papers proposing a fresh issue of shares worth up to ₹6,650 crore.

The proposed IPO has brought the long-running dispute between the two companies back into focus, particularly over whether the pending litigation and Zostel's claimed equity entitlement have been adequately disclosed to prospective investors.

PRISM says Zostel's applications are not maintainable

PRISM defended the Delhi High Court's latest development and criticised Zostel's repeated applications.

"The Delhi High Court has today dismissed as withdrawn yet another application filed by Zostel. This comes barely a month after Zostel withdrew its previous application before the same Court. Despite its previous counsel informing the Court that legal fees remained unpaid, Zostel has continued to file fresh applications seeking overlapping protections. We have consistently maintained that these applications are frivolous and not maintainable. The arbitral award on which Zostel's claims were founded was set aside in its entirety by the Delhi High Court in May 2025. We remain confident in our legal position and will continue to place complete reliance on the judicial process,” a PRISM spokesperson said.

Zostel, on the other hand, maintained that its withdrawal did not affect its substantive rights or the underlying dispute.

"Zostel’s rights and remedies remain fully reserved and unaffected. The substantive dispute between Zostel and OYO continues to remain pending before the Hon’ble High Court, and Zostel remains confident of its case on merits," the company said.

Zostel also said it would continue to monitor PRISM's proposed IPO and take steps to protect its rights and the interests of investors.

[Source: Business Standard, NDTV]