The Welsh assembly has issued legal proceedings against food group Dairygold to claw back £660,000 in grant aid the Cork-based firm received for a plant it closed in Wales last year.

Dairygold's cheese-packing facility at Felinfach, Ceredigion, which it acquired in 2001, was awarded the grant in 2002 to expand its packing lines and to help cover the cost of cheese-packing machinery at the plant.

The work was completed in 2004, but the factory closed in April last year with the loss of 115 jobs.

Following the closure, Dairygold sold the machinery to the Irish Dairy Board's (IDB) Kerrygold cheese-packing plant in Leek, Staffordshire. Dairygold has a 20 per cent stake in the IDB.

"The company is disappointed to have received notice of legal proceedings against it, but the company is confident of its case and it will defend it vigorously," Dairygold said in a statement.

"Dairygold Food Products UK has always acted correctly and in good faith in regard to the Felinfach, Ceredigion, cheese-packing facility, working hard to build the business and create employment."

However, it said the plant had become unviable because of huge overcapacity that emerged in the British cheese-packing sector.

"In a very difficult market, with no sight of a prospect of improvement, the company lost money, and ultimately, and regrettably, had no choice but to make the hard but necessary decision to close the business."

Since the plant closed last year the Welsh assembly has been seeking to recover the processing and marketing grant.

Dairygold said it had co-operated fully with officials of the Welsh assembly to agree matters in respect of the grant aid provided and to explore possible other uses for the facility.

"Dairygold Food Products UK has sought to meet officials of the Welsh government assembly in recent weeks, without success, to seek to agree any matters outstanding in relation to the Felinfach business," it said.