The board argued that PwC was involved in the Satyam Computer Services scandal, a decade-old case in which the company chairman admitted to making up around $1bn (£0.81bn) of cash on its books.
SEBI accused PwC of failing to check the veracity of the company’s bank statements, and ignoring confirmation statements from the banks in return.
At the time, PwC said it was “disappointed” with the way the investigation had concluded.
“The SEBI order relates to a fraud that took place nearly a decade ago in which we played no part and had no knowledge of,” the firm said in January 2018.
Now, India’s Securities Appellate Tribunal (SAT) has overturned the ban on the grounds that it was “erroneous in law”.
The tribunal ruled that the only body with the power to act against the firm is the national auditor watchdog, the Institute of Chartered Accountants of India. It argued that fraud could not be proved based on negligence alone.
“SEBI has no authority to look into the quality of audit and auditing services,” SAT said. “SEBI can only take remedial and preventative action. The direction issued is neither remedial nor preventative, but punitive."
“There is no shred of evidence that the auditors fabricated, fudged or were in collusion with the management of Satyam Computer Services,” the ruling said.