FHRAI To Approach EOW To Report Oyo’s Fraud By Misappropriation & Manipulation Of Revenue Figures In Accounting Records

In three separate complaints and an FIR filed recently in Mumbai, Noida and Gurugram by hoteliers based in respective cities have blown the lid off Oyo’s indulgence in manipulation and suppression of sales figures and misappropriation of revenues due to hotels as well as to the Government of its GST and taxes.

In the case of the Mumbai based hotel – Hotel Samrat, evidence has emerged indicating that Oyo suppressed revenues and duped the Hotel of over Rs. 70 lakhs of overflow share and the Hotel has filed claims of Rs.11.30 crores. Noida based Corporate Suites, a unit of Dost Hospitality Services Pvt. Ltd. has provided evidences of insidious fraud committed by Oyo of over Rs. 32 Cr. The hotel owner has asked the Arbitral Tribunal to conduct Forensic Audit of Oyo group. In the case of the Gurugram based hotelier – Eneskay Hospitality Pvt Ltd, it has duped the owner of Rs. 5 Cr by manipulating the booking records.

Based on FIRs and complaints filed by several aggrieved hoteliers from across the country, India's apex Hospitality Association - Federation of Hotel & Restaurant Associations of India (FHRAI) has decided to approach the Economic Offences Wing (EOW) as well as other law enforcement agencies against Oyo.

“During an Arbitration hearing on 4th March 2021, Oyo's Counsel inadvertently disclosed their true factual revenue figures from Oct 2018 till Feb 2021. These figures were much higher than the figures provided to the hotel in their monthly reconciliation sheets on basis of which the revenue was being shared under Oyo’s contract with the hotel,” says Mr Paramjit Singh Ghai, Owner of Hotel Samrat, Mumbai.

“Oyo has not only been deliberately suppressing sales figures and under-reporting revenues generated from the hotel but it has also been evading taxes. There are several Oyo partner hotels across the country and globe who have also reported the same,” says Mr Ghai “Another aspect of the matter which is a consequence of this fraud committed by Oyo that has come to light is that the company solicited a large number of bookings at competitive prices of less than Rs.1000/- per booking which as per the rate slab does not attract any GST. However, Oyo generates a supplementary invoice under the tab ‘convenience fee’ in addition to the booking invoice and conveniently evades tax,” he adds.

“The Oyo Group of hotels has committed insidious fraud and we have provided evidences to the Arbitral Tribunal. Briefly put, apart from the fact that the copies of invoices raised to hotel guests by the Oyo Group were much higher than amounts that they represented to the hotel through the Monthly Booking dump data, to have been earned vis-à- vis the same guest and booking ID. Oyo has itself given invoices that confirm that there were more bookings than what was disclosed contemporaneously and has neither given any explanation to the Tribunal for the same nor confirmed how many such invoices actually exist.

Oyo has confirmed on affidavit that it does not generate invoices for monies received by way of cancelled or no-show bookings but appropriates the said revenue. Under the garb of dynamic pricing, Oyo notified guests of change in room tariff and motivated guests to re-book rooms at lower cost and charged them for room cancellation which was never disclosed to Hotel owners. As a consequence of this fraud, there has also been a loss to the public exchequer,” says Mr. Pramod Kumar Singhal, Managing Director of Dost Hospitality Services Pvt. Ltd. of Corporate Suites.

Based on the complaint by Gurugram based Eneskay Hospitality Pvt Ltd, a case has been registered (FIR No. 0428) against Oyo Rooms and its group companies including Alcott Town Planners, My Preferred Transformation and Hospitality Pvt Ltd and Oravel Stays Pvt Ltd under IPC sections 120B (criminal conspiracy), 406 (criminal breach of trust), 420 (cheating), 467 & 468 (forgery).

“As per our agreement with Oyo, we were supposed to receive from Oyo group a part of the revenue from bookings after deducting the commission. However, we realized that Oyo has been manipulating the booking records and embezzling funds from the sales of rooms, as well as from the F & B revenue. They forged account statements and manipulated the sales figures which were shared with us. Oyo used to book rooms at our hotel at a lower price under its three different group companies but offer the rooms to guests at higher rates and profited from the difference. They also collected GST and service tax from guests but did not deposit it. The modus operandi are essentially cheating, manipulation and siphoning off funds to their other companies vide 'convenience fee' or ‘brand fee'. From the very beginning their intentions were to cheat the hoteliers,” says Mr Yogesh Kapoor, Director, Eneskay Hospitality Pvt Ltd.

In the recent NCLAT insolvency proceedings of Oyo, over 110 operational creditors filed Form B claims worth almost Rs.250 Cr. The Insolvency proceedings against Oyo are now in the Supreme Court. The hotel industry is giving a clarion call to conduct a forensic audit by the EOW to look into the malafide conduct of operations of Oyo before it goes public with its IPO.

“Based on our complaints, Oyo is already under investigation by the Competition Commission of India (CCI). The CCI has identified a case for investigations into Oyo’s business practices under Section 26(1) of the Competition Act, 2002. There are several FIRs registered by hotels across the country against Oyo for cheating and fraud. We will take immediate steps to inform the relevant authorities that have been tasked with implementation of the Goods and Services Tax regime of the above facts and demand conducting a forensic audit by the EOW,” concludes Mr Gurbaxish Singh Kohli, Vice President, FHRAI.