What the media didn't cover was that the arrest was false. The government or the bank did not authorize it, but rather policemen acted on their own behalf. Once the matter was cleared, the founder was free to go.
If you were right, Unocoin would not have to close their ATM. It is closed till date.
Operating an ATM without the banks permission is illegal in India. Although the founders did everything they can to use ther term "Kiosks" in their internal company documents, the Indian media used the term ATM everywhere. Due to this and the fact thay they didn't have a proper bank account to store fiat, they were forced to shut down.