Foreign exchange penalty failed where payment was not shown to be made on behalf of a non-resident.

Penalty for contravention of section 9(1)(d) of the Foreign Exchange Regulation Act, 1973 was unsustainable where the record did not show that the payment was made by order or on behalf of the named non-resident. The charge failed because the statutory ingredient connecting the payment to the non-resident was not established, and the recorded circumstances suggested only a payment by the appellant on his own behalf in lieu of amount received by NRE cheque. On that basis, the alleged contravention was not substantiated and the penalty was set aside.

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Issues: Whether the penalty for contravention of section 9(1)(d) of the Foreign Exchange Regulation Act, 1973 was sustainable when the alleged payment was not shown to have been made by order or on behalf of the named non-resident.

Analysis: The charge rested on an allegation that the appellant had made payment of Rs. 5,50,000 by order or on behalf of a person resident outside India. The order recorded no finding explaining how that statutory ingredient was satisfied. Even on the assumption that the payment had been made, the circumstances described did not establish that it was made by order or on behalf of the non-resident; at most, it would be a payment by the appellant on his own behalf in lieu of the amount received by NRE cheque. The contravention alleged under section 9(1)(d) was therefore not substantiated.

Conclusion: The penalty was not legally sustainable and was set aside.

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