Jurisdictional fact for foreign exchange penalty must be proved before section 8(1) liability can be sustained.

The Foreign Exchange Regulation Act, 1973 was not confined to citizens of India and could apply to persons falling within its definitional scheme, including non-citizens in the circumstances contemplated by section 2(p); the objection that a non-citizen was outside the Act was rejected. However, penalty under section 8(1) could not be sustained without proof that the appellant satisfied the definition of a "person resident in India", because that jurisdictional fact was foundational to applying the provision. As the record did not establish the necessary ingredients of section 2(p), the penalty could not be imposed against the appellant and was set aside insofar as it related to him.

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Issues: (i) Whether the Foreign Exchange Regulation Act, 1973 applied only to citizens of India and excluded a non-citizen appellant; (ii) whether the appellant could be subjected to penalty under section 8(1) of the Act without proof that he fell within the definition of "person resident in India".

Issue (i): Whether the Foreign Exchange Regulation Act, 1973 applied only to citizens of India and excluded a non-citizen appellant.

Analysis: Section 1(3) extended the Act to citizens of India outside India and to branches and agencies outside India of companies or bodies corporate registered or incorporated in India. The provision did not state that the Act applied only to citizens of India. Reading it otherwise would make the definition of "person resident in India" under section 2(p) partly redundant. The statutory scheme therefore permitted application of the Act to persons who fell within the relevant definitional provisions, including non-citizens in the circumstances contemplated by section 2(p).

Conclusion: The first objection was rejected and the Act was not confined only to citizens of India.

Issue (ii): Whether the appellant could be subjected to penalty under section 8(1) of the Act without proof that he fell within the definition of "person resident in India".

Analysis: Section 8(1) operated with reference to persons resident in India in relation to the specified foreign exchange dealings. The record did not establish that the appellant satisfied the ingredients of section 2(p), particularly the circumstances necessary to bring him within clause (iii) of that definition. As the adjudicating authority had not dealt with this jurisdictional and foundational requirement, the basis for applying section 8(1) to the appellant was not proved.

Conclusion: The penalty could not be sustained against the appellant under section 8(1).

Final Conclusion: The challenge succeeded on the applicability of section 8(1) for want of proof that the appellant was a person resident in India, and the impugned penalty order was set aside insofar as it concerned the appellant.

Ratio Decidendi: Where statutory liability under a foreign exchange provision depends on the person falling within a defined class, that foundational jurisdictional fact must be established before penalty can be sustained.

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