The government on Wednesday terminated contracts worth HK$11 million with Xin Ding Xin – the company accused of fraud in supplying drinking water to government offices.

In a late night statement, a government spokesman said the Financial Services and the Treasury Bureau had informed all bureaux and departments to terminate all contracts with Xin Ding Xin and any of its associated companies.

They include a HK$6 million contract to supply chemicals to the Drainage Services Department, and another for HK$5 million with the Fire Services Department for data entry services.

A company director and his shareholder wife have been arrested on suspicion of fraud and violating the Trade Descriptions Ordinance in relation to the water contract.

"Based on the information obtained by the Government Logistics Department on the business operation of XDX earlier, as well as recent enforcement actions against XDX by government departments, the government reasonably believes that XDX and companies associated with its owners... would no longer be capable of performing the contracts," the statement said.

The spokesman also noted that the government had received a HK$1 million deposit from Xin Ding Xin for the water contract, and it is entitled to make deductions from this sum to recover losses arising from the contract termination.

He added that any illegal activity would be referred to the police.

Xin Ding Xin's contract with the Government Logistics Department for bottled drinking water, and three other contracts associated with its owners for chemicals, had already been terminated earlier.