A magistrate’s court in Mumbai’s Kurla area declared the arrest of two Chhattisgarh men illegal on November 5, 2026 and ordered their release, ruling that the investigating officer had not followed mandatory arrest procedure under India’s new criminal code in an alleged Rs 7.50 lakh cryptocurrency investment fraud case, PTI reported.
What the fraud case alleges
Police allege that Vedprakash Kunjalal Sahu, 33, and Daulat Singh Dulardas Sahu, 45, both residents of Chhattisgarh, worked with others under a firm called Flow X Protocol Pvt Ltd to lure a 30-year-old Kurla-based stock and crypto trader into investing in USDT, a dollar-pegged cryptocurrency, with a promised 45 percent monthly return, according to PTI.
The accused allegedly showed the complainant forged registration documents along with fake RBI and SEBI certificates to make the scheme appear regulated, and collected Rs 7.50 lakh in cash from him between February and August this year. When the promised returns and the principal were not paid, the complainant approached Kurla police, PTI said.
Police registered an FIR under sections 318(2), 319(2) and 336(3) of the Bharatiya Nyaya Sanhita, India’s new penal code, along with provisions of the Information Technology Act. The two men were arrested on November 2 in Goa, where they were allegedly organising an investment seminar, PTI reported.
Why the court called the arrest illegal
Police sought 10 days of custodial remand for the two men before Judicial Magistrate First Class S M Gourgond at the Kurla court. Instead, the magistrate declared the arrest illegal and ordered the men released, finding that the investigating officer had not complied with mandatory arrest safeguards under sections 35(3) and 48 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), the code that replaced the Code of Criminal Procedure, according to PTI.
The court noted that the alleged offences carry a maximum sentence of up to seven years in prison, which makes Supreme Court guidelines on arrest procedure mandatory in the case. It also found that the investigating officer had not produced the two men before the nearest magistrate in Goa for a transit remand before bringing them to Mumbai, a step the court said was required under a recent Bombay High Court ruling, PTI reported.
The magistrate allowed that police may still act against the two men if an arrest “remains absolutely necessary,” but said this must be done strictly in line with the law and Supreme Court guidelines on arrest, according to PTI’s report.
What else the court ordered
The court separately rejected the prosecution’s request to invoke the Maharashtra Protection of Interest of Depositors (MPID) Act against the two men, since offences under that law are triable only by a special court, PTI said. The magistrate also directed that a copy of the order be sent to the concerned Deputy Commissioner of Police for action over the investigating agency’s lapses in the arrest, according to the report.
Advocates Shriganesh Sawalkar and Adira Tandan, who represented the two men, had opposed the remand application, arguing that the arrest violated sections 35(3) and 48 of the BNSS, PTI reported.
Where this case fits in India’s crypto fraud problem
Cases like this one have become a recurring pattern in India’s virtual digital asset market: an unregistered firm promising fixed, high monthly returns, backed by forged regulatory paperwork. The Reserve Bank of India told the Parliamentary Standing Committee on Finance in July 2026 that virtual digital assets pose risks to an emerging economy like India and should not be legalised, citing the difficulty of tracking offshore entities among its concerns, according to committee proceedings reported at the time.
India currently has 54 virtual digital asset service providers registered with the Financial Intelligence Unit, the practical line between a regulated platform and an unregistered one, alongside roughly 39.3 million KYC-verified crypto users holding assets worth about Rs 20,437 crore, per figures cited in the same committee proceedings. The Kurla case follows the same template investigators describe in these warnings: a scheme with no verified regulatory registration, offering returns far above what any registered platform promises.
Frequently asked questions
What is the BNSS, and why did it matter here?
The Bharatiya Nagarik Suraksha Sanhita (BNSS) is the criminal procedure code that replaced the Code of Criminal Procedure in 2024. Sections 35(3) and 48 set out safeguards an investigating officer must follow when arresting a person, including producing them before the nearest magistrate for a transit remand when the arrest happens outside the case’s jurisdiction. The Kurla court found these were not followed in this case.
Why didn’t the Maharashtra depositor-protection law apply?
The court said offences under the Maharashtra Protection of Interest of Depositors (MPID) Act can only be tried by a special court set up for that purpose, so it could not be invoked in these proceedings before the Kurla magistrate.
The underlying fraud investigation against Vedprakash Kunjalal Sahu and Daulat Singh Dulardas Sahu remains open. Whether Kurla police re-arrest the two men in compliance with the court’s directions, or the Deputy Commissioner of Police takes action over the lapses the magistrate flagged, has not yet been reported.
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