Why NDDB Subsidiaries Mother Dairy and NDDB Dairy Services Incurred Losses in Past 2 Years?
Moneylife Digital Team 24 March 2021
Mother Dairy Fruit and Vegetables Ltd (Mother Dairy or MDFVPL) and NDDB Dairy Services (NDS), the two subsidiaries of National Dairy Development Board (NDDB), have suddenly reported losses through the past two financial years. Especially, during FY2018-20, Mother Dairy incurred a loss of Rs261.95 crore, out of which almost Rs190.85 crore are due to provisioning against deposits made in Infrastructure Leasing and Financial Services (IL&FS). On the other hand, NDS, in which NDDB had invested about Rs200 crore have earned a profit of just Rs72 lakh over the past 10 years, shows a reply given in the Lok Sabha. Last month, the ministry of corporate affairs (MCA) had ordered an enquiry into the loss-making Mother Dairy. But more about it later.
Jyotiraditya M Scindia, a member of Parliament (MP) had asked questions about the loss-making subsidiaries of NDDB, reasons for the loss and if the government has taken any steps to check such losses.
In a written reply, Dr Sanjeev Kumar Balyan, minister of state for fisheries, animal husbandry and dairying, states, "During the last 10 years’ period as mentioned above, Indian Immunologicals Ltd has incurred loss only in one year in 2015-16, IDMC Ltd has incurred loss only in one year in 2012-13, Mother Dairy has incurred losses only in two years in 2018-19 and 2019-20 while NDDB Dairy Services is a not-for-profit section 8 company."
According to the minister, the losses incurred by the subsidiary companies, in one or two years are not abnormal considering the market dynamics. In fact, he says, over the past 10 years, each of the subsidiary companies of NDDB has cumulatively registered profit or excess of income over expenditure. "The cumulative profit after tax or excess of income over expenditure during this period for all the four subsidiary companies have been Rs742 crore," he added.
Interestingly, according to sources, the period during which both Mother Dairy and NDS incurred losses, both had many common directors. For example, Dilip Rath, who was heading NDDB was also chairman of Mother Dairy, while Deepak Tikku was nominee director of NDDB on the board of Mother Dairy. Mr Tikku was also chairman of Mother Dairy's audit committee. Two more people associated with NDDB were also directors of Mother Dairy during the same period. This includes Sugata Mitra, who at present is managing director (MD) of NDS and Dr Om Veer Singh, deputy MD of Mother Dairy. Earlier, Dr Singh was MD of NDS. 
As per NDDB’s latest available report for FY2018-19, the share capital held by NDDB in Mother Dairy was Rs250 crore and in NDDB Dairy Services it was Rs200 crore. "Clearly, the set of common directors have much to explain given that they have completely eroded the share capital base held by NDDB in Mother Dairy. Though NDDB Dairy Services is a not-for-profit company, and seems to be unable to earn revenues. In the wake of rapidly hardening international prices of milk products and reportedly tight supply milk from rural areas, it remains to be seen what will be the financial reporting of Mother Dairy for FY2020-21?" the sources say.
As reported by Moneylife, 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 NDDB Board transferred Rs199 crore to NDDB Dairy Services, in the form of contribution of capital for purchase of equity of an equal amount.
However, NDDB continued to evade questions asked of it under the Right to Information (RTI) Act on the Rs200 crore lying in NDDB Dairy Services as equity and all income accruing thereof. 
In July 2019, Dr Balyan, the minister of state, while responding to a question had said, the government had advised NDDB to extend the provisions of the RTI Act to its subsidiaries, including NDS. 
Responding to a specific question asked by Manoj Jha, a MP, the government had said, "NDDB has informed that it has contributed Rs200 crore towards equity of NDDB Dairy Services. The department has asked NDDB to supply a copy of the resolution of NDDB board in this regard, which is awaited. This ministry has advised NDDB to extend the provisions of the RTI Act to its subsidiary companies including NDDB Dairy Services." 
In February 2021, in a reply in the Rajya Sabha, Anurag Thakur, minister of state for finance and corporate affairs, had said, "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.
 Prof Jha, the MP in Rajya Sabha, had 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 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 National Company Law Tribunal (NCLT), the 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 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. (Read: MCA Orders Investigation of Mother Dairy; 2 Directors Resign
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."
You may also want to read...
1 year ago
loss of NDDB is bcoz it is located in Delhi Locate it in Anand ( Gujarat) it will make profit. It was reported Kurian walked out when he was told NDDB will head quartered in Delhi .. Delhi menas play thing of self centered Baboodom like IL ES
Free Helpline
Legal Credit