WHETHER BITCOINS ARE LEGAL IN INDIA? IF SO, WHY?

As such, there is no prohibition to mining or trading in Bitcoin or transfer of Bitcoins. Following points to be kept in mind:
Constitution of India, 1950; If we look at the present entries enumerated under Entry 36 and 46 of List I of the Seventh Schedule read with Article 246 of the Constitution, which states that the Central Government is allowed to legislate in respect of currency, coinage, legal tender and other like instruments respectively. It is also stated that each entry will be read in a broader and widest possible sense. However, Court has never interpreted these entries to include “Virtual Currency”. Thus, even if parliament has power to make law on the “Virtual Currency” under Article 248 of the Indian Constitution. However, the same has not been done. Since, in the present scenario “contract” also includes “electronic contract”. S. 23 of the Contract Act provides that certain considerations are unlawful and certain contracts may be opposed to public policy. Public policy has not been defined in the Contract Act and is an evolving expression. The Supreme Court has held that courts ought not to be quick to expand on the scope of what is public policy, they may, in the context of facts and circumstances take into account new developments and explain the same in the context of public policy. Section 23 of the Contract Act provides: What consideration and objects are lawful, and what not. The consideration or object of an agreement is lawful, unless -
it is forbidden by law;
or is of such nature that, if permitted it would defeat the provisions of any law;
or is fraudulent;
or involves or implies, injury to the person or property of another;
or the Court regards it as immoral, or opposed to public policy.
   In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. The Supreme Court has held that courts would not arbiter on soundness or otherwise of general policy decisions. Further, courts ought not to engage in the exercise of whether one particular policy is good over the other. There is nothing in law to suggest that Bitcoin are opposed to public policy or otherwise unlawful. A contract relating to Bitcoin, prima facie, is not such that its enforceability would defeat the provisions of law or is otherwise fraudulent. Therefore, a contract respecting Bitcoin, whether it is in relation to mining of Bitcoin, transfer of Bitcoin or transfer of Bitcoin for consideration, is not per se illegal.
   But a court is empowered to hold that Bitcoin are opposed to public policy and therefore not valid consideration under Indian law. However, the same has neither been amended nor been interpreted by the Court to include Bitcoin. Hence, it falls under the ambit of Contract Act but even if court states that a Bitcoin contract is opposed to public policy, it will be limited for only that particular contract and will not extend to the all Bitcoin contracts.