The National Dairy Development Board (NDDB) has admitted to employing its retired employees at its subsidiary NDDB Dairy Services (NDS) with the same benefits that they were receiving before retiring from the Board or its subsidiaries.
Ironically, NDS is a not-for-profit company, where retired executives of NDDB are hired at huge salaries.
This is exactly what Moneylife
wrote in an article titled NDDB's Golden Scheme for Retired Executives
27 May 2019. “…NDDB used its subsidiary NDDB Dairy Services (NDS) to finance the employment of several retired senior executives with the same benefits that they were receiving before retiring from the board or its subsidiaries,” we had written.
In an email response to our article, on 1 June 2019, NDDB says, "NDS was a new subsidiary and it was important that it had professionals who could build into it the NDDB core values including focus and empathy towards the producers. Such professionals are not easy to find in the open market and also the remuneration payable is rather high. Four senior officials mentioned in the list of your article, had relevant expertise and experience and were asked to serve at NDS. When they started serving NDS, the total annual remuneration paid to all four of them was around Rs95 lakh per annum."
With regard to the remuneration, NDDB says, NDS considered two options, adding, "First was the remuneration being paid to the retired senior bureaucrats who were appointed to statutory or regulatory authorities. The second was to retain the pay and allowances drawn on the last post held. Since in the former case the amount was much higher, Deepak Tikku's remuneration was fixed on the same salary & allowances as that of managing director (MD) of NDDB."
As Moneylife pointed out, instead of taking care of farmers through the cooperative movement, NDDB has been busy ensuring the welfare of its retired senior executives.
Although NDDB, in its reply is trying to compare NDS, its subsidiary with a regulatory body or a cooperative movement like itself, a letter dated 12 May 2011 sent by the secretary from the department of animal husbandry, dairying and fisheries, in Government of India, clearly distinguishes between the Board and the company.
The letter from Rudhra Gangadharan, the then secretary, says, "NDDB may make appropriate arrangements for implementation of the project through agencies including NDDB Dairy Services. Since government will deal directly only with NDDB, references to NDDB Dairy Services in the same breath as NDDB in the PIP are not considered necessary. The clarification required in respect of the capability and exact role of NDDB Dairy Services should also be provided at the earliest."
After perusing responses from NDDB and documents shared by insiders, two top executives emerge as key decision-makers almost in all the affairs. One is Dilip Rath, chairman of NDDB since 1 August 2016. Mr Rath, from the Indian Administrative Service (IAS) cadre, was the joint secretary in the department of animal husbandry, dairying and fisheries, in Government of India between 2008 to 2010. After taking an early retirement, on 1 December 2011, he joined NDDB as its managing director (MD) and is now working as its chairman.
The second key executive in NDDB affairs is Deepak Tikku, who, as we had mentioned in our article, retired as MD of NDDB in 2010. Immediately after his retirement, he was appointed as chairman of NDS, and continued till March 2017 with the same salary and perks that he was getting in NDDB.
NDDB, however, says, its board had approved appointing Mr Tikku as chairman of its subsidiary, and the board of NDS has finalised his appointment.
A letter of 29 August 2014 that had been sent by Mr Rath, the then MD of NDDB, to Mr Tikku, however, tells a different story. Mr Rath says, "...the resolution (NDS board resolution dated 26 June 2010) also states that you shall devote sufficient time and attention to the business of the company for which you shall be paid remuneration as was applicable to you when you were MD, NDDB. Moreover, your appointment as chairman of the company (NDS), as borne out by the resolution, is in accordance with Article 16 of the AOA of the company which is specifically meant for appointment of MD or whole-time director. In view of all the above, it is evident that you are the chairman and MD of the company."
During that period, Mr Tikku was also nominee director on three NDDB subsidiaries, viz., Mother Dairy Fruit and Vegetables Ltd (MDFVPL), Indian Dairy Machinery Co Ltd (IDMC), and Indian Immunologicals Ltd (IIL). Later, he resigned as nominee director from all the three companies.
In its response, NDDB, however, gives a different spin to the resignation of Mr Tikku. It says, "In 2014, the central government appointed a new chairman of the NDDB. Mr Tikku was then a director on the board of three subsidiary companies (MDFVPL, IIL and IDMC) as a nominee of the NDDB. There was a proposal to appoint the new NDDB chairman as additional director and chairman of MDFVPL by the board of MDFVPL. The chairman NDDB insisted that he be directly appointed as director. Mr Tikku pointed out that the MDFVPL board can appoint him only as additional director and chairman and if he has to be appointed as a director, then the general body meeting should be called. Mr Tikku later resigned from the Board of IIL as he was of the view that IIL should not increase substantially the price of FMD vaccine, which was used for mass vaccination of cattle. Thereafter chairman NDDB wished to replace Mr Tikku as a director on the board of the remaining two subsidiary companies and action was initiated in accordance with the provisions of the Companies Act. Mr Tikku submitted his resignation as director on the Board of the two companies."
"After a couple of years, the chairman NDDB resigned and a new chairman was appointed. Based on the discussions the new chairman had, Mr Tikku was appointed as a director on the Board of MDFVPL, one of the three companies on which he was director earlier. It may be noted that Mr Tikku is not an advisor to MDFVPL," the response from NDDB says.
During 2014 and 31 July 2016, T Nanda Kumar, an IAS officer, who retired as agriculture secretary of the union government was the chairman of NDDB. Earlier, during October 2010 to February 2014, Mr Kumar was a member of national disaster management authority with the rank of minister of state in the Indian Government. He was known as stickler for rules in NDDB. Mr Kumar was replaced by Mr Rath, who continues to hold the position.
Talking about Dr Amrita Patel, who retired as chairman of NDDB in 2014, the email response agrees that a proposal was indeed approved in September 2009 to make her a permanent invitee on the board of NDS. NDDB also accepts that Dr Patel heads management committee of semen stations at NDS.
"Meetings of this Committee takes place in Delhi or Anand. Dr Patel is on board of another organization in Delhi and has been appointed from time to time on various committees of the central government whose meetings also take place in Delhi. So she need not be on a committee of NDS to be able to come to Delhi. Dr Patel is on board of organizations in Mumbai. So would it mean that this is so because she could visit Mumbai?" NDDB asks in its reply.
From August 2016, Mr Rath was the chairman of Mother Dairy. His term as chairman of NDDB ended on 1 December 2018. On 3rd December, the government issued a notification (S.O. 5949(E)) extending Mr Rath's first term 'until further orders'.
Later on 6 March 2019, just before the model code of conduct came into force, the government decided to extend retrospectively Mr Rath's term for two more years.
Responding to this, NDDB says, "A complaint making certain allegations was then received. The cabinet committee of appointments (ACC) extended Mr Rath's term as Chairman NDDB till further orders. After the allegations were found to be incorrect, the ACC approved his appointment for a period of two years. There were many appointments made just before the model code of conduct came into operation. So why single out Mr Rath's appointment?"
As we have pointed out, NDDB Dairy Services or NDS was set up as a private limited company in 2009 with NDDB subscribing to only Rs1 crore as share capital.
Thereafter, NDDB’s nominee members moved a resolution to convert NDDB Dairy Services Pvt Ltd into a not-for-profit company under Section 25 of the Companies Act 1956 (now Section 8 of the Companies Act 2013). NDS was set up to function as the delivery unit of NDDB for field operations relating to promoting producer companies and productivity enhancement services.
"...based on detailed discussions it was decided that since some of NDDB's current roles would be undertaken by NDS, it follows that a part of funds available with NDDB which finances its expenditure would need to be transferred to NDS. It was proposed and approved that around 15% of the funds available with NDDB be transferred as equity to NDS. This worked out to be around Rs200 crore. The authorised capital of NDS was raised to Rs200 crore and NDDB subscribed to the entire authorised capital of Rs200 crore," NDDB says in its response.
NDDB Dairy Services was re-incorporated as a not-for-profit company in the very year that it was first incorporated as a private limited and wholly-owned subsidiary of NDDB. Immediately thereafter, the Board transferred Rs199 crore to NDDB Dairy Services, in the form of contribution of capital for purchase of equity of an equal amount.
The permission given by the Central government to NDDB was only for forming NDDB Dairy Services as a private limited company and the contribution of Rs1 crore as NDDB’s equity in NDDB Dairy Services when it was a private limited company could be considered in line with Section 43(2)(a). The contribution of another Rs199 crore to NDDB Dairy Services as share capital from NDDB needed specific approval from the Central government as per Section 43(2)(b) of the NDDB Act.
NDDB, however, says, "NDS is a wholly owned subsidiary of NDDB and therefore under 43(2)(a), no prior approval is required from Central Government. Your article also states that NDS is a private company. The NDDB Act makes no distinction between them as far as the transfer of assets or funds is concerned."
You may also want to read…