ED’s regulatory inconsistency may cost India global capital

For over a decade, the Enforcement Directorate (ED) has styled itself as India’s toughest financial watchdog under FEMA and PMLA, tasked with impartial, consistent, and transparent enforcement. Two recent matters—brought under the same statute and probed by the same agency—pose a troubling question for businesses, investors, and constitutional scholars: are different standards being applied to different defendants?

Two cases, one statute, divergent results

On June 17, 2026, the ED announced that the Reserve Bank of India had compounded a FEMA case involving Apollo Hospitals Enterprises Limited and five of its directors—Preetha Reddy, Suneetha Reddy, S.K. Venkatraman, Akhileswaran Krishnan, and S.M. Krishnan. The probe had flagged alleged contraventions across four heads: FDI in a then-prohibited retail trading segment; issuance of Foreign Currency Convertible Bonds; investment via the FII-PIS route breaching the 24 percent paid-up capital ceiling; and overshooting the 51 percent sectoral cap in multi-brand retail. By the ED’s own account, the alleged contraventions exceeded Rs 2,424 crore. The outcome: Apollo paid Rs 17.76 crore in compounding charges; each director paid Rs 18 lakh. Adjudication ended. There were no arrests and no custodial detention.

Contrast that with PPK Newsclick Studio Pvt. Ltd., a digital news portal. The ED alleged FEMA violations linked to foreign remittances of roughly Rs 82 crore. In February 2021, the agency conducted a 38-hour search across multiple locations. On October 3, 2023, following broader allegations in the public domain, Delhi Police arrested founder-editor Prabir Purkayastha under the UAPA, and he was lodged in Tihar Jail for 225 days. On May 15, 2024, the Supreme Court ordered his release, holding the arrest unconstitutional because written grounds were not supplied before remand, applying its precedent in Pankaj Bansal v. Union of India. On May 29, 2026, the Delhi High Court went further, quashing both the EOW FIR and the ED’s ECIR, calling the continuation of proceedings a gross abuse of process and finding “not a whisper of incriminating evidence.”

Separately, in February 2026, the FEMA Adjudicating Authority imposed penalties totaling Rs 184 crore—Rs 120 crore on the company and Rs 64 crore on Purkayastha—for alleged remittance violations of about Rs 82 crore. That dispute continues.

The math is blunt: alleged breaches of Rs 2,424 crore at a major hospital chain resulted in a Rs 17.76 crore civil compounding and no custody; alleged breaches of Rs 82 crore at a news portal yielded multi-agency criminal pursuit, a terror-law arrest, 225 days in jail, and penalties exceeding twice the alleged amount.

Compounding works—if applied evenly

Section 15 compounding under FEMA is a legitimate, well-established mechanism that lets entities admit contraventions, pay prescribed charges, and close proceedings without criminalization. The RBI compounds numerous cases each year, and recent policy has clearly tilted toward a facilitative approach that improves the ease of doing business. That is a welcome shift.

The sticking point is consistency. If compounding is the appropriate way to resolve complex FEMA issues—and it often is—why was it readily available to Apollo and many others but not to a far smaller alleged breach at a media startup? Why was one case framed as fit for a civil settlement while another—smaller in quantum—was pursued with the harshest criminal instruments?

A larger pattern of unpredictability

The contrast fits a broader picture. Between 2014 and 2024, the ED registered 5,297 PMLA cases but secured only 40 convictions. The Supreme Court has urged the agency to focus on the quality of evidence and prosecution. Analyses of case patterns indicate that a very high share of politicians investigated in recent years have been from Opposition parties, far above the prior decade’s share, prompting a collective approach to the apex court by multiple Opposition parties in 2023. In 2024, while granting bail to a former Delhi Deputy Chief Minister after 17 months in custody, the Supreme Court noted that a trial involving hundreds of witnesses and voluminous records was nowhere near conclusion and that prolonged pre-trial detention imperils the right to personal liberty under Article 21.

What investors infer

For businesses and global funds, enforcement risk translates directly into pricing, timelines, and allocation. Due diligence frameworks prize predictability. When the same law, applied to similar categories of alleged violations, produces diametrically different outcomes, investors infer that results may depend on factors other than the conduct itself. That perception inflates risk premiums, deters board approvals, and diverts capital to jurisdictions where process is steadier and outcomes more foreseeable.

A facilitative enforcement model can be a competitive asset—but only if it is even-handed. Selective facilitation is not reform; it is uncertainty masquerading as discretion.

Fixing the trust gap

• Publish reasons: In significant FEMA cases, the ED and RBI should issue concise, reasoned notes explaining why compounding was offered or declined, and how penalties were calibrated. Transparent criteria discipline discretion.
• Recalibrate custody: Parliament should revisit PMLA’s bail framework to prevent de facto punishment through prolonged pre-trial incarceration where trials cannot reasonably conclude.
• Codify criteria: Establish clear, objective, and public thresholds for FEMA compounding—by materiality, intent, remediation, and recurrence—applicable uniformly to startups and large listed companies alike.

The ED exists to safeguard India’s financial integrity. When enforcement choices appear to track power rather than principle, the harm extends beyond individual defendants: it erodes the credibility that businesses rely on to commit long-term capital. The India promised by the Constitution—and the India investors are eager to back—rests on rules, not on who you are.