Appellate tribunal cuts Fema violation penalty slapped by ED on PwC from ₹230cr to ₹81cr

Time of India

2 days ago

PwC
NEW DELHI: An appellate tribunal here has imposed a Rs 81 crore penalty on PwC, reducing it from the Rs 230 crore slapped by
Enforcement Directorate
(ED) on the audit firm in a case of violation of the Foreign Exchange Management Act (Fema).
PwC has been accused of receiving Rs 230 crore FDIs in violation of Fema rules as audit firms cannot receive foreign direct investment (FDI), according to ED. The case was initiated by ED on information that PwC had received FDI running in crores in the name of grant.
"The company is engaged in audit practice which does not permit receipt of the FDI," the ED had argued and which was upheld by the tribunal on Safema (Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976).
The transactions were carried by PwC without the approval of the RBI, violating Fema rules, it had said.
The bench of the tribunal - headed by Justice Munishwar Nath Bhandari - in an order of July 9 accepted the investigation of ED but reduced substantially the penalty amount on the company, a former chairman and other officials.
In a show cause notice issued on Sept 11, 2019, ED had imposed a penalty of Rs 230 crore on PwC, Rs 23 lakh on former chairman Deepak Kapoor, Rs 11 lakh on Shyamal Mukherjee, the then chairman of PwC, as well as Rs 5 lakh on Ramesh Rajan, also a former chairman.
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"We find the penalty to be excessive and disproportionate to the allegations against the appellant (PwC). The appellant has received grants under licence and accordingly inward remittance, though it is in contravention of the (Fema) Act and Regulations made therein. Taking the overall view, we reduce the penalty from Rs 230 crore to Rs 80.50 crore on the appellant, PwC," the judgment said, and ordered for release of the bank guarantee furnished by the accused.
The judge further observed that the penalty of Rs 23 lakh on Kapoor was excessive and reduced it to Rs 5.75 lakh in place, finding it to be disproportionate to the contravention keeping in view the overall circumstances of the case.
"In the light of the findings recorded above, we cannot subscribe the arguments raised by the counsel for the appellants, rather, find a case for contravention of Sections 6(2), 6(3), 9(b), 10(5), 10(6) of Fema," the judge noted.