The Hindu Business Line : Ministry orders prosecutions against Xerox Modicorp

THE Ministry of Company Affairs (MCA) has initiated prosecutions against Xerox Modicorp Ltd, the Indian subsidiary of Xerox Corporation, for violations under the company law based on the recommendations of the independent investigator appointed by it. The company was accused of siphoning off funds.

According to official sources, about 13 prosecutions for violations of various provisions of the Companies Act have been identified and ordered. Also, the Central Bureau of Investigation, the Customs & Excise Department and the Enforcement Directorate have been advised to proceed against the company and its directors for violations of the Acts under their jurisdiction such as Prevention of Corruption Act, Indian Penal Code, Customs & Excise Act, Foreign Exchange Regulation Act and Foreign Exchange Management Act.

In fact, an inter-ministerial group (IMG) has been closely monitoring the developments. The IMG was set up to examine whether the company is guilty of siphoning off funds or indulged in making `improper payments' to Government officials for securing high-value orders. The IMG was also looking into the recommendations of the independent investigator.

The investigation by an independent investigator appointed by the Company Affairs Ministry has revealed that there was siphoning off funds. A major foreign shareholder of the company had alleged that Xerox Modicorp was making `improper payments' to Indian Government officials. However, the investigator, according to sources, could not mention the names of the officials. The IMG is also examining this aspect.

The IMG comprises nominees of the Revenue Department, the Central Bureau of Investigation, the Law Ministry and the Company Affairs Ministry.

In June 2004, the Delhi-based chartered accountant firm Surendar K. Jain & Co, appointed as independent investigator, submitted its report to the Ministry.

It took the firm close to two years to complete its investigation.

This move followed Xerox Corporation's revelations to the Securities and Exchange Commission in the US that the Indian subsidiary had made "improper payments" to Indian Government officials for securing high-value orders.

The investigator had also looked into the role of foreign representatives on the board of the company.

The investigator was asked to commission the enquiry through a separate body, which would route the queries through the consulates of the countries to which the representatives of the board belong.

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