Residential status under FERA turns on statutory definitions and facts, not a bank account in India.

Residential status under the Foreign Exchange Regulation Act, 1973 is determined by the statutory definitions and surrounding facts, not merely by the existence of a bank account in India. On the facts noted, the person's association with a business in Muscat, visits to Oman, and short acquaintance at the time of the loan supported the inference that he was resident outside India, sustaining contravention under section 9(1)(a). The material also did not justify interference with the penalty amount, as no adequate basis was shown for reduction. The original penalty order was therefore restored.

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Issues: (i) Whether Justus Thomas was a person resident outside India within the meaning of the Foreign Exchange Regulation Act, 1973, so as to sustain the finding of contravention under section 9(1)(a); (ii) whether the penalty already levied called for reduction.

Issue (i): Whether Justus Thomas was a person resident outside India within the meaning of the Foreign Exchange Regulation Act, 1973, so as to sustain the finding of contravention under section 9(1)(a).

Analysis: The respondent's own statement under section 40 showed that Justus Thomas was associated with a business establishment at Muscat and that the respondent had come to know him during visits to Oman. The statement also indicated that, when the loan was given on 18 January 1978, the respondent had only a short acquaintance with him, supporting the inference that Justus Thomas was then resident outside India. The definition in section 2(p) excludes a citizen of India who stays outside India for carrying on business or vocation outside India, and section 2(q) treats such a person as resident outside India. The nature of a bank account in India did not determine residential status and the Appellate Board had overlooked the governing definitions.

Conclusion: Justus Thomas was a person resident outside India, and the finding of contravention under section 9(1)(a) was rightly restored.

Issue (ii): Whether the penalty already levied called for reduction.

Analysis: No material was found to justify interference with the quantum of penalty. The plea for reduction had not been pressed effectively before the appellate authority, and no reason was shown to disturb the amount imposed by the first authority.

Conclusion: The penalty was not liable to be reduced.

Final Conclusion: The appellate order was unsustainable in law, and the original order imposing penalty stood restored, resulting in success for the revenue side.

Ratio Decidendi: Residential status under the Foreign Exchange Regulation Act, 1973 must be determined from the statutory definitions and the surrounding factual circumstances, and not merely from the existence of a resident bank account in India.

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