NEW DELHI (Reuters) - A top Indian cotton-growing state has told two local companies that seeds they sold to farmers may have contained traces of an unapproved GM strain from Monsanto, according to government notices seen by Reuters that warn of action against the firms.

U.S. agrochemicals company Monsanto Co told Reuters late last year that local seed companies have attempted to “incorporate unauthorized and unapproved herbicide-tolerant technologies into their seeds” for profit, leading to the proliferation of illegal seeds, according its own internal investigation and that by the southern state of Andhra Pradesh.

Indian seed firms deny this. The authorities say they are still investigating how the strain has seeped into Indian agriculture.

The southern state of Andhra Pradesh last year launched an investigation after finding nearly 15 percent of its cotton acreage was planted with an unapproved variety of genetically modified seeds developed by Monsanto, which dominates India’s cotton seed market.

A panel of officials inspected some seed production plots and commercial cotton fields and collected “leaf samples” that tested positive for the Monsanto’s Roundup Ready Flex (RRF) strain, which is engineered to tolerate common weedkillers.

Farmers told the officials the seeds that produced the positive tests were from brands marketed by Kaveri Seed Co Ltd and Nuziveedu Seeds Ltd (NSL), according to “show cause” notices sent to the Indian companies on Jan. 29 by the office of the state’s commissioner of agriculture.

The notices, which were reviewed by Reuters, do not refer to any other evidence linking the seeds to the two companies. Both companies deny any wrongdoing.

Using unapproved GM strains is illegal and the state earlier said criminal charges can be brought against those found guilty under India’s Environment Protection Act.

“Any Genetically Modified Crop in India should be released for commercial crop use only after approval of Genetic Engineering Approval Committee (GEAC),” the notices read, referring to a committee of experts under the federal environment ministry.

They asked the companies to explain within five days why their cotton seed licenses “should not be suspended/cancelled”.

Contacted by Reuters, Kaveri Seed and NSL said the seeds were not sold through their dealers or distributors. The state authorities should not have issued the notices without further supporting evidence, they said.