SFTP receiver error

Hi,

I am doing FTP->PI->SFTP scenario. Its basically a pass through (no Mapping). We have done many scenarios like this so far. But we are facing issue with one vendor. We able to login to below server from FTP client (File Zill), via PI 7.31 command terminal or from local command line. But we are facing issue only PI receiver SFTP channel.

Below is SFTP receiver configuration(with all the tabs).

We are getting below error. We tried deleting existing channel and creating new one as well but no luck

07/29/2013 14:19:54.477 Error Message could not be forwarded to the JCA adapter. Reason: 10: pwd failed. 07/29/2013 14:19:54.477 Error MP: exception caught with cause javax.resource.ResourceException: 10: pwd failed. 07/29/2013 14:19:54.484 Error Exception caught by adapter framework: 10: pwd failed. 07/29/2013 14:19:54.485 Error Transmitting the message to endpoint <local> using connection File_http://sap.com/xi/XI/System failed, due to: com.sap.engine.interfaces.messaging.api.exception.MessagingException: javax.resource.ResourceException: 10: pwd failed.

Has any one faced this issue?

Thanks

Kishore