MCA Orders Investigation of Mother Dairy; 2 Directors Resign
Moneylife Digital Team 11 February 2021
The ministry of corporate affairs (MCA) has ordered an enquiry into the loss-making Mother Dairy Fruit & Vegetable Pvt Ltd (Mother Dairy or MDFVPL), a subsidiary of the National Dairy Development Board (NDDB).
According to sources, soon after the exit of Dilip Rath from NDDB, two of his allegedly close associates resigned from the board of directors of Mother Dairy. But more about it later.
In a reply in the Rajya Sabha, Anurag Thakur, minister of state for finance and corporate affairs, says, "An inquiry under section 206 of the Companies Act, 2013 is ordered (against Mother Dairy)." Section 206 of the Act gives the registrar of companies (ROC) the power to call for information, inspect books and conduct inquiries in respect of any company.
Professor Manoj Kumar Jha, a member of Parliament (MP) has asked questions about the affairs of the loss-making subsidiary of NDDB. Prof Jha has also asked if the losses of Mother Dairy are due to the provisioning of Rs190.85 crore against deposits made in Infrastructure Leasing and Financial Services (IL&FS).
Responding to this, Mr Thakur, the minister of state, informed that Mother Dairy has booked expenses of Rs190.85 crore as 'exceptional items before tax' on the face of the statement of profit & loss (P&L) for 2018-19.
"In the notes to account for the financial year 2018-19 it is mentioned, inter-alia, that 'as a result of increased credit risk in relation to outstanding balances from IL&FS and the uncertainty prevailing due to the proceedings pending with the NCLT, management has provided for full amount of Rs190.85 crore year ended 31 March 2019. The same has been disclosed as an exceptional item in the results. The company, however continues to monitor the developments in this matter closely as more information or outcome to the resolution plan of IL&FS becomes available and is committed to take appropriate legal action that may be necessary to ensure full recoverability,” the minister says.
Earlier in December 2019, the department of economic affairs (DEA) under the ministry of finance had, for the second time, asked the ministry of corporate affairs (MCA) to take necessary action (probe by serious fraud investigation office -SFIO) over the alleged Rs1,000 crore fraud involving about 800,000 farmers affiliated to Mother Dairy.
In an office memorandum dated 9 December 2019, Tamanna Sinha, deputy director in DEA had said, "The undersigned is directed to refer to this department's memorandum of even number dated 29 April 2019 enclosing therewith a copy of letter dated 15 April 2019 received from Dharmendra Pratap Singh addressed to secretary, DEA, along with its enclosures on the above subject (Call for immediate investigation by SFIO into alleged frauds by MDFVPL of over Rs1,000 crore and involving eight lakh farmers) and to enclose a subsequent letter dated 30 May 2019 of Mr Singh on the same matter for further necessary action under intimation to this department."
As per a report from the Indian Express, the DEA had issued similar directions on 29 April 2019. "Besides the IL&FS investment issue, the complainant also alleged that the company diverted over Rs100 crore (from contributions of over Rs450 crore received from NDDB) into over 15 subsidiaries set up illegally and that later disappeared," the report says.
The report also points out that the day after the DEA’s first letter, Sangram Chaudhary was appointed as the new managing director (MD) after Mother Dairy's chief executive officer (CEO) Sanjeev Khanna made his exit from the company on health grounds. 
Mr Khanna is the same person who, on 13 February 2019, wrote a letter to prime minister Narendra Modi seeking intervention in recovering Mother Dairy's Rs190 crore invested in IL&FS. Mother Dairy had invested Rs190.84 crore in inter-corporate deposits of IL&FS for a period of eight to 16 days, in a series of six transactions during August 2018, days before IL&FS defaulted on loan repayments. (Read: Finance Ministry Again Seeks 'Necessary' SFIO Probe in Mother Dairy's Alleged Rs1,000 Crore Scam)
Interestingly, Prof Jha, the MP, had also asked question on the letter sent by Mother Dairy to the PM stating that the Rs190.85 crore invested in IL&FS was payable to farmers. 
However, Mr Thakur, the minister of state, refused to provide a direct answer on this. Instead he stated, "As per the provisions of the Companies Act, 2013, the statutory returns are required to be filed by the companies with registrar of companies (ROC). The correspondence(s) of the companies with other authorities or individuals are not required to be filed with ROC."
In May 2019, Moneylife had reported how NDDB subsidiaries and subsidiaries of subsidiary seem to vanish with regularity and without any explanation from its annual reports. Whistle-blowers inside NDDB are perturbed at what they call a growing trend of several hundred crore rupees of public money being pumped into subsidiaries without any discussion on what happens to the funds. 
Insiders had alleged that a study of NDDB’s accounts would reveal that for every rupee that it lent to dairy cooperatives between 1998 and 2010, around 50 paise went to some of its own subsidiaries. However, a reply from NDDB to Moneylife shows, for every rupee lent to dairy cooperatives between 2004-05 and 2017-18, nearly another rupee was lent to its own subsidiaries, the bulk of which went to Mother Dairy. 
The biggest beneficiary of NDDB’s largess is Mother Dairy, which, over the years, has built a huge franchise and brand to compete with Amul.  
As reported by Moneylife, Mr Rath, whose tenure as chairman of NDDB ended on 30 November 2020, was denied an extension. Until a full-time chairman is appointed, the government asked Varsha Joshi, who was joint secretary in the ministry of animal husbandry & dairying, to take charge as the chairman of NDDB. (Read: Dilip Rath Is Out of NDDB, Varsha Joshi Appointed Interim Chairperson)
Soon after Ms Joshi took charge, Deepak Tikku, who was director of Mother Dairy since the company's inception in 2000, resigned. Earlier in 2015, following a notice for his removal by NDDB, he had resigned. When Dilip Rath became chairman of NDDB, Mr Tikku was re-appointed as director of Mother Dairy.
Insiders, who are disturbed at the misuse of funds, told Moneylife that Mr Tikku, who retired as managing director (MD) of NDDB in 2010, was appointed chairman of NDDB Dairy Service (NDS) immediately after retirement, till March 2017. The salary and perks he used to receive as MD of NDDB, continued in this new position as well. After April 2017, Mr Tikku was working as advisor and mentor at NDDB Dairy Services and Mother Dairy. (Read: NDDB's Golden Scheme for Retired Executives
Dr Saugata Mitra, another board member of Mother Dairy, also left the board. In 2017, he was promoted as executive director in the Mother Dairy board. Along with human resources (HR), he was given additional responsibility to manage Mother Dairy's three businesses – Brand Dhara, Brand Safal and international business. He had joined Mother Dairy in 2007 as chief people officer and group head HR. At present, Dr Mitra is MD of NDS. 
According to our sources, Yuvaraj Yashwant (YY) Patil, an alleged loyalist of Mr Tikku, also left his position on the board of Mother Dairy. Mr Patil was executive director of NDDB. He is still on the board of NDS as director. 
Data obtained from the MCA website shows two new directors have joined the board of Mother Dairy. This includes, Ms Joshi, who is interim chairman of NDDB, and Nalin Mansukhlal Shah. While Ms Joshi joined Mother Dairy's board on 19th January, Mr Shah become director on 1 February 2021. Last year in July, Mother Dairy appointed Leeladhar Rama Moorthi Yadavalli as director on its board, the MCA data shows.
Last year in October, Mother Dairy had replaced its managing director Sangram Choudhary. As per our information, Mr Choudhary was replaced following audit by the Comptroller & Auditor General (CAG) and a petition filed in the Jharkhand High Court about delay in action in a corruption case. (Read: Mother Dairy's MD Sangram Choudhary Replaced?)
Mr Chaudhary was executive director of NDDB before taking over as MD of Mother Dairy. Earlier, he was chairman of the Jharkhand Milk Federation. He was also instrumental in the rolling out of the National Dairy Plan (NDP).
At present, Dr Omveer Singh, deputy MD, is handling Mother Dairy operations. 
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