A court-appointed arbitrator has ruled that hospitality major Oyo is bound by the terms agreed upon with rival Zo Rooms, which required the Ritesh Agarwal-led company to cede up to 7 per cent of its equity. The ruling delivers a major setback to Oyo, which said it will contest the order vigorously. The verdict of the Arbitral Tribunal comprising former Chief Justice of India AM Ahmadi came on Saturday and found the term sheet, signed in November 2015 by SoftBank-backed Oyo to acquire Zo, to be a binding agreement.

Although the Oyo-Zo Rooms deal failed to fructify, the arbitrator said claimant Zo Rooms’ parent, Zostel Hospitality, was entitled to claim relief in the form of allotment of shares from the respondent, Oyo parent Oravel Stays. The order also said Zo Rooms was entitled to claim costs of its case.

“The claimant cannot be held responsible for the acts and omissions of the respondent and/or its shareholders, by virtue of which some of the obligations could not be fulfilled by the claimant. ..This tribunal has held that claimant no. 1 is entitled to claim/pray for the relief of allotment of shares from the respondent to claimant nos. 2 to 17,” read the order.