The Hindu Business Line : Ministries differ on NDDB setting up subsidiaries

THE long-pending issue pertaining to powers bestowed upon the National Dairy Development Board (NDDB) to form subsidiaries under the NDDB Act has found the Ministry of Company Affairs and the Ministry of Law and Justice come up with divergent views. While the Ministry of Company Affairs said there was no legal bar against Mother Dairy Fruits and Vegetable Ltd (MDFVL), a NDDB subsidiary, floating further subsidiaries, the Ministry of Law and Justice has said such a move needed prior approval from the Union Government.

The Ministry of Law and Justice, to which the matter was referred to by the Department of Animal Husbandry and Dairying, has concluded that Mother Dairy Foods Ltd, being a MDFVL subsidiary, was also a subsidiary of NDDB. As per information available with Business Line, the Ministry has advised that a Central Government approval was required each time NDDB decided to set up companies, either by itself or in conjunction with any of its subsidiaries, including instances where private companies were involved.

Also, it was held by the Law Ministry that relevant sections of the NDDB Act should hold supreme, even if it was not consistent with provisions of the Companies Act, 1956. The Law Ministry, before tendering its opinion, had referred the matter to the Ministry of Company Affairs for its views on the matter.

The Ministry of Company Affairs made clear its views on the matter in November 2004, saying that NDDB, having floated MDFVL with the approval of the Government as a subsidiary under the Companies Act, was a company. Given that neither the Memorandum of Association nor the Articles of Association of MDFVL prohibited it from floating further subsidiaries, it could do so as there was nothing illegal about it, the Company Affairs Ministry is understood to have said.

It is learnt that the Department of Animal Husbandry and Dairying is mulling its next move as the Ministry of Law and Justice made clear its stand on the issue after seeking the opinion of the Ministry of Company Affairs. It was the National Co-operative Dairy Federation of India that originally raised the question, as to whether NDDB was empowered to form subsidiary companies without the prior approval of Central Government. This was initially raised with the Prime Minister's Office almost two years ago and the latter had referred it to Department of Animal Husbandry and Dairying for resolution.

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