Karnataka High Court Quashes Criminal Case Against Founders of Bitcoin Firm For Setting Up Bitcoin ATM

Karnataka High Court Quashes Criminal Case Against Founders of Bitcoin Firm For Setting Up Bitcoin ATM

The Karnataka High Court (HC) quashed and set aside a criminal case that was registered against the founders of Bitcoin company, Unocoin for setting up a Bitcoin ATM in Bengaluru in 2018. While doing so, the HC cited the judgment of the Top Court in the case of Internet and Mobile Association of India v. Reserve Bank of India.

The Karnataka HC has quashed criminal proceedings initiated against two founders of city-based Unocoin Technologies Pvt. Ltd., one of the leading companies in India dealing with Bitcoin, a cryptocurrency (BV Harish& Ors.(Petitioners) v. State of Karnataka & Anr. (Respondents).

The Court set aside the case registered against Sathvik Vishwanath, co-founder and CEO, and B.V. Harish, co-founder, and Chief Financial, and Compliance Officer of the company (Petitioners), both of whom were charged in October 2018 by the Cybercrime Police.

Justice HP Sandesh relied on the judgment of the Supreme Court in the case of Internet and Mobile Association of India v. Reserve Bank of India, wherein the Top Court had set aside a circular issued by Reserve Bank of India (RBI) on 6 April 2018 regarding the prohibition of virtual currencies.

The factual background of the case is that on the basis of RBI's circular the police arrested the petitioners; the said circular had imposed restrictions on regulated entities such as banks and Non-Banking Finance Companies (NBFCs) from dealing with virtual currencies and from providing services to crypto businesses.

Advocates Jaideep Reddy and Cyril Prasad Pais, representing the petitioners cited the verdict of the Apex Court (supra), wherein it had set aside the circular with regard to the prohibition of virtual currencies. The said argument was not contested by the public prosecutor, appearing for the State.

The HC agreed to the contentions of the advocates of the petitioners and stated that when proceedings against the petitioners were initiated based on the RBI circular, the same is liable to be quashed since the circular itself has been set aside.

The Court held that "Looking into the principles laid down by the Apex court in Internet and Mobile Association of India's case, referred (supra) wherein the Apex Court has categorically held that the circular dated 6 April 2018 issued by the Reserve Bank of India is liable to be set aside."

It further stated, "In the case on hand also, proceedings have been initiated against the petitioners based on the circular dated April 6, 2018 and when the very circular dated April 6, 2018, issued by the Reserve Bank of India is set aside by the Apex Court and when the proceedings initiated against these petitioners on the strength of Annexure-B (RBI Circular), the very proceedings initiated against these petitioners are liable to be set aside."

The Court while allowing the petition and quashed the FIR and chargesheet filed against the petitioners.