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DCA expands probe into Xerox Modicorp — Moves CLB to look into fraudulent dealings

Richa Mishra
Sarbajeet K. Sen

NEW DELHI, July 17

THE noose is tightening around Xerox Modicorp Ltd with the Department of Company Affairs (DCA) today widening its ongoing probe by moving the Company Law Board (CLB) to seek its assent to investigate whether the company had indulged in fraudulent dealings. The CLB would be hearing the application moved by DCA on Thursday.

According to official sources, the application has been moved under Section 237 of the Companies Act. This allows the Government to move the CLB for assessing whether the circumstances relating to business dealings of a company indicated any "intent to defraud its creditors, members or any other person or otherwise for a fraudulent or unlawful purpose."

The CLB would also be assessing whether those running the affairs of the company in India have "been guilty of fraud, misfeasance or other misconduct towards the company or towards any of it members."

Till now, the DCA's investigation into the alleged "improper payments" to Government officials to acquire supply contracts were limited to inspect the books of account of the company under Section 209 (A) of the Companies Act.

DCA's latest move comes in the backdrop of an earlier reference made by it by the Central Vigilance Commission (CVC) to conduct a thorough inquiry into the affairs of the company. However, the commission itself has decided to take the backseat for the time being in the entire affair to avoid complicating the ongoing investigations.

"The Department of Company Affairs (DCA) is already conducting an inquiry into the company. We would wait for them to complete their investigations before taking action. Otherwise it will be case of too many cooks spoiling the broth," the Central Vigilance Commissioner, Mr N. Vittal, told Business Line. The CVC is the apex body with the mandate to deal with corruption cases in the Government sector and in other public sector undertakings (PSUs). The Central Bureau of Investigation (CBI) comes under the direct purview of the CVC.

With the parent company in US Xerox Corporation having revealed that its Indian joint venture had made payment to officials to acquire supply orders, it is only a matter of time that the vigilance commission would enter into the fray to conduct their own investigations and prosecute the officials involved in the scandal. The "improper payment" to running into several lakh dollars to Government officials here was allegedly made during the period 1996-97 to 2000-2001.

The DCA's inspection of the books of accounts of the company would be more or less co-terminus with the years during which the payments were allegedly made. The Department has already issued notice to the company on July 12 that it would be inspecting its books for the past five years. The company has been asked to revert back to the department with its response with 10 days from the date of the notice.

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