The formal investigation stems from a detailed petition submitted by representatives of the Milk Producers Cooperative Society, naming top cooperative leadership and administrative personnel. The complaint alleges systemic financial misconduct and institutional mismanagement involving five key figures, including Parag Milk Union chairman Rajni Devi, general manager Avinash Satyarthi, regional dairy development officer Natthu Singh, and two relatives of the union chair. The allegations assert that state grants earmarked for cooperative infrastructure and processing development were siphoned off through falsified logistics, phantom supply schemes, and diverted contractor kickbacks.

Investigators are examining fraudulent milk movements between the primary Gagol processing unit and regional markets across Baghpat, Delhi, and Hapur. The complaint outlines significant freight and rental billing fraud, alleging that cooperative funds were systematically disbursed for transportation services involving non-existent vehicles. In addition, the inquiry focuses on fabricated procurement manifests attributed to defunct primary societies, which allegedly masked synthetic milk entries while administrative payrolls were routed to ghost workers who never performed duties at the processing plant.

To recover misused public capital, state regulatory authorities have directed the federation to initiate statutory proceedings under Sections 65 and 68 of the Uttar Pradesh Cooperative Societies Act, 1965. These legal provisions empower the state to conduct formal audits, establish personal liability, and initiate asset recovery orders against officials found responsible for cooperative asset diversion or fiduciary failure. The regulatory intervention signals strict oversight over regional dairy unions struggling with liquidity crunches and financial governance deficits.