PMLA Tribunal Confirms Breach, Slashes Penalty By Over Rs 150 Crore

In a major development in the long-running case against global accounting giant PricewaterhouseCoopers Pvt. Ltd. (PwC), the Appellate Tribunal under the Prevention of Money Laundering Act (PMLA) has upheld FEMA contraventions but reduced the penalty imposed by the Enforcement Directorate (ED) to Rs 80.5 crore from Rs 230 crore.

The case stems from a 2019 show-cause notice issued by the ED’s Special Director (Eastern Region), following a Supreme Court directive in response to a PIL filed by an NGO. The apex court had ordered the ED to examine PwC’s affairs under the Foreign Exchange Management Act (FEMA), 1999.

After completing its probe, the ED slapped a hefty Rs 230.4-crore penalty on PwC and six individuals, accusing them of illegally routing foreign direct investment into a non-permitted sector by disguising capital inflows as ‘grants’. The funds were reportedly received from PricewaterhouseCoopers Services BV, a foreign entity within PwC’s global network.

The ED held that PwC and the other noticees had received these foreign remittances without RBI approval, in clear violation of FEMA Sections 10(6), 6(2), 6(3), and 9(b). PwC operates in audit, taxation, and financial consultancy — sectors where FDI is not permitted without prior RBI clearance.

Officials alleged that the company deliberately labeled inward remittances as “grants” to circumvent FEMA restrictions and regulatory scrutiny. The ED found a direct connection between the remittances and so-called dividends, described as Network Service Charges (NSCs), indicating the transactions were in fact capital account transactions (CATs) — which attract strict regulatory control.

While the PMLA Tribunal agreed with the ED’s conclusion that PwC violated FEMA, it criticised the quantum of the penalty as “excessive and disproportionate.”

In its ruling, the tribunal reduced PwC’s penalty from Rs 230 crore to Rs 80.5 crore, granting partial relief while maintaining the company’s culpability.

It also significantly reduced fines against former PwC brass Shyamal Mukherjee, Deepak Kapoor and Ramesh Ranjan and fully waived the penalty imposed on former employee Shivam Dubey, who it held had merely acted on instructions without any independent decision-making authority.

The tribunal conducted a clause-by-clause review of the Grant Agreements (GA-1 and GA-2) and held that the so-called ‘grants’ came with contingent liabilities — requiring repayment if not utilised within specified timeframes. Such conditions, the tribunal ruled, clearly placed the transactions within the scope of Capital Account Transactions under Section 2(e) of FEMA.

The argument advanced by PwC — that the transactions did not alter assets or liabilities across borders — was rejected outright. The tribunal clarified that the definition of ‘capital’ under FEMA must align with the statutory definition of CAT, and not be interpreted to PwC’s convenience.

The tribunal also dismissed PwC’s claim that the ED had violated procedural rules under Adjudication Rules 4(3) and 4(4).