The le that you specify on the command line, such as in
fpc foo.pp
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will be looked for ONLY in the current directory. If you specify a directory in the lename, then the compiler will look in that directory:
fpc subdir/foo.pp
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will look for foo.pp in the subdirectory subdir of the current directory.
Under case sensitive le systems (such as linux and unix), the name of this le is case sensitive, under other operating systems (such as dos, Windows NT, os/2) this is not the case.