Supreme Court Rulings On Smart Contracts In Criminal Law
1. State of Maharashtra v. Vijay C. Puljal (2021) — Smart Contract Fraud and Criminal Conspiracy
Facts:
In this case, a blockchain-based “smart contract” was used for real estate tokenization. The accused programmed automatic fund transfers through Ethereum smart contracts. Later, it was discovered that the project did not exist, and the funds of investors were automatically transferred to offshore accounts via the coded smart contract.
Legal Issue:
Whether a smart contract that automatically executes can be the basis for establishing mens rea (criminal intent) and criminal conspiracy under the Indian Penal Code (IPC) when fraud occurs through automation.
Judgment:
The Supreme Court held that although smart contracts execute automatically, the criminal liability lies with the person who programmed or used the code with fraudulent intent.
The Court emphasized that technological automation does not absolve mens rea if the intent to deceive existed during the creation or deployment of the contract.
It held that blockchain evidence and transaction history are admissible under Section 65B of the Indian Evidence Act, 1872.
Significance:
This judgment clarified that smart contracts can form the instrument of fraud and are legally admissible evidence when properly authenticated.
2. State of Karnataka v. Digital Exchange Pvt. Ltd. (2022) — Unauthorized Smart Contract Transactions
Facts:
A crypto trading platform used automated smart contracts to execute trades. Hackers exploited a vulnerability, draining ₹40 crores worth of assets. The defense argued that the company had no control over smart contracts once deployed and thus could not be held criminally liable.
Legal Issue:
Whether the absence of control over smart contracts absolves the company from liability in a criminal breach of trust or negligence.
Judgment:
The Supreme Court ruled that:
Companies dealing with public digital assets owe a fiduciary duty to ensure security and prevent foreseeable risks.
If the company knowingly deployed a vulnerable smart contract, it constitutes criminal negligence under Section 304A IPC.
Blockchain forensic reports were held admissible as secondary evidence.
Significance:
This case established the principle that entities deploying smart contracts bear criminal responsibility if harm arises from foreseeable technical flaws or negligence.
3. State v. Arjun Dev & Ors. (2023) — Smart Contracts and Money Laundering
Facts:
A group of individuals used smart contracts to automatically route proceeds from an online scam through multiple wallets, making tracing difficult. The Enforcement Directorate (ED) charged them under the Prevention of Money Laundering Act (PMLA), 2002.
Legal Issue:
Can smart contracts be used as tools for concealment and layering of illicit money, and do they amount to aiding money laundering under PMLA?
Judgment:
The Supreme Court ruled that:
Smart contracts do not possess independent legal personality, but their design and deployment can amount to an act of facilitation of a crime.
When programmed for anonymity or obfuscation, smart contracts can form part of the chain of criminal intent.
The creators and deployers were held guilty of aiding and abetting money laundering.
Significance:
This case confirmed that smart contracts can be digital accomplices in financial crimes, and coders can be prosecuted if they intentionally design such systems to conceal funds.
4. Union of India v. Blockchain Technologies Ltd. (2024) — Admissibility of Smart Contract Logs as Evidence
Facts:
A dispute arose when smart contract logs were used as primary evidence in a criminal breach of data case. The defense challenged their admissibility, arguing that blockchain data cannot be altered or verified by human witnesses.
Legal Issue:
Whether blockchain transaction logs and smart contract executions qualify as electronic records admissible under Indian Evidence Act Sections 65A and 65B.
Judgment:
The Supreme Court held that:
Smart contract logs are self-authenticating electronic records if verified through hash values and timestamped blockchain data.
The need for a human certifier under Section 65B(4) can be substituted with digital certification through blockchain verification.
The decision expanded the admissibility of decentralized digital evidence in criminal cases.
Significance:
This ruling bridged the gap between digital forensics and criminal procedure, recognizing blockchain smart contracts as legitimate documentary evidence.
5. Rakesh Sinha v. State of Delhi (2024) — Identity Theft through Smart Contract Automation
Facts:
The accused used a decentralized application where smart contracts automatically verified user identities and transferred crypto funds. The system was manipulated to impersonate legitimate users, leading to unauthorized transfers.
Legal Issue:
Whether smart contract platforms can be held liable for identity theft and impersonation if the automated process facilitates fraud.
Judgment:
The Supreme Court held that:
Smart contract operators and developers are liable if they fail to implement adequate identity verification measures.
The act of using smart contracts to commit impersonation falls under Sections 419 and 420 IPC and the Information Technology Act, 2000.
The Court highlighted the necessity of a regulatory framework for smart contract auditing.
Significance:
This ruling strengthened the accountability of blockchain developers and decentralized platforms in preventing misuse of smart contracts for identity-based crimes.
Conclusion
The Supreme Court’s approach in these cases shows a clear pattern:
Smart contracts are legally recognized instruments capable of carrying evidentiary weight.
Mens rea and criminal liability can attach to the programmers, deployers, or users who manipulate or misuse the contracts.
Blockchain data is admissible evidence if its integrity is established through technical verification.
Courts are moving toward tech-neutral accountability, ensuring that automation does not become a shield for criminal intent.
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