Centre orders prosecution against Xerox Modi

The government has ordered prosecution against Xerox Modi Corporation for offences under the Companies Act.

"The prosecution order for various offences under the Companies Act was approved a few days back," said an official in the ministry of company affairs.

The ministry has asked the regional directorate at Kanpur to initiate action against the company. The company has been charged with falsification of books of accounts including payments being not recorded in the books.

When contacted in London, a Xerox representative said the company is yet to get a copy of the order and therefore, would not like to comment on it.

The findings note that the company had a policy of making improper payments, non-recording of IOUs and making payments to third parties for which no services were provided over years.

This brings the long drawn investigations begun in 2002, to some conclusion. Xerox had in 2002 conceded to 'improper payments' of Rs 3-3.5 crore (Rs 30-35 million) by its Indian subsidiary, XMC, to get government orders.

The investigation also hauls up the audit committee for being in the know of weakness in the control system relating to IOUs. The auditors have also been found guilty of not making disclosures on various issues.

The investigation report points out that question of impairment of assets of Rs 30 crore (Rs 300 million) were raised by the CFO Rajeev Batra in the board meeting in August 2000 but no cognisance was taken by the board.

The findings note that the management of the company had knowledge of contravention but ignored the issues except for the year 2001 and management's representation given to the auditors did not bring out the said facts.

The order refers to contravention under various sections of the Companies Act including section 193, 211, 217, 221, 227, 240 and 292A.

This prosecution order is only related to offences under the Companies Act. The tax department had launched search operation resulting in Xerox approach Income Tax Settlement Commission with a declaration of roughly Rs 100 crore (Rs 1 billion) and deposit about Rs 30 crore.