Mother dairy Booth
Mother Dairy boothCredit: Reuters

Mother Dairy Fruit and Vegetable Private Ltd (MDFVL), a wholly-owned subsidiary of National Dairy Development Board, had invested Rs 190 crore days before the troubled infrastructure company defaulted on its payments. Now, with the investment going bad, Mother Dairy has sought Prime Minister Narendra Modi's intervention in recovering the amount.

According to Indian Express, in a series of six transactions between August 20, 2018, and August 28, 2018, MDFVL had invested Rs 190.84 crore in inter-corporate deposits (ICDs) of IL&FS with a maturity period of 8-16 days.

The timing of investment is questionable as financial troubles of IL&FS were in the public domain at the time of Mother Dairy's investments. The group was also planning a desperate measure of selling its assets to repay its loans. In fact, one of the subsidiaries of IL&FS, ITNL had already defaulted in June 2018, just two before Mother Dairy's investment. Following the default, Sanjeev Khanna, the CEO of MDFVL, wrote a letter to PM Modi in February and informed him that default has "weakened" Mother Dairy's ability to make the payments to farmers.

The IL&FS group is facing serious liquidity crisis and has defaulted on interest payments on various debt repayments since 27 August.Reuters

In his letter, Khanna said, "farmers are dependent upon MDFVL for their livelihood as the amount invested in IL&FS was payable to farmers as the initial investment was made for a short duration (8-16 days maturity period). The failure on part of IL&FS to pay the amount has resulted in a severe cash crunch for MDFVL and it is struggling to pay the farmers and keep the supply chain of agricultural products running." Moreover, he also requested the PM "to kindly intervene in this matter and help us in recovering the due amount from IL&FS in the interest of farmers." 

Shockingly, even after IL&FS defaulted on its payments to MDFVL on the maturity dates between September 5 and September 8, 2018, instead of taking corrective measures, Mother Dairy renewed the investment for one more month on IL&FS's request. The investment is unlikely to be recovered anytime soon as recently the National Company Law Appellate Tribunal (NCLAT) had granted moratorium against all claims against IL&FS.

Earlier this week, India's Serious Fraud Investigation Office (SFIO) had made the first arrest in the case. Hari Sankaran, the former chairman and managing director of IL&FS, was arrested for "abusing his powers in IL&FS Financial Services Ltd through his fraudulent conduct."