A division bench comprising Justices B.K. Narayan and R.N. Mishra ordered that no coercive step be taken against the company's officials and their business till the next hearing on May 18.
During the course of hearing, the bench kept on asking the prosecution lawyers as to how an offence under Section 420 of the Indian Penal Code (IPC) was made out against the makers of 'Freedom 251' smartphone but no cogent reply was offered. The court then ordered them to file a reply within two weeks.
A first information report (FIR) was registered in March against Ringing Bells director Mohit Goel and company president Ashok Chaddha under Section 420 of the IPC as well as the Information Technology (IT) Act on a complaint filed by Bharatiya Janata Party (BJP) leader Kirit Somaiya.
The court also allowed the petitioners the liberty to move an application for the release of their passports.
"We are very happy with today's (Friday's) order. We shall now press for the quashing of the FIR as there is no merit in it and extraneous factors have gone into its lodging. This FIR is a strategy to derail the timely launch of the flagship product of the company," said Abhishek Vikram, counsel for Ringing Bells.
(Also see: Freedom 251 Company's Books to Be Scrutinised)
"The company has already sold 28,000 units of its other products and has developed innovative strategies to meet its cost for delivering the smartphone for Rs.251 to its customers. The company's aim is to reduce the digital divide between urban and rural India by selling the smartphone for Rs. 251," Vikram added.
Ringing Bells launched 'Freedom 251' in February in the presence of veteran BJP leader Murli Manohar Joshi.
It distributed some "prototypes" of the product to the media which turned out to be Adcom handsets. However, the company maintained that the device has been developed "with immense support" from the government.
According to the company, the smartphone will run on Android 5.1 operating system and sport a 4-inch qHD IPS display, a 3.2-megapixel primary and a 0.3-megapixel front camera.
However, doubts were raised after assessments of the handset's viability concluded that such a device cannot be offered for less than Rs. 2,300 - 2,400.
The company said it planned to give 25 lakh handsets in the first phase before June 30.
Ringing Bells had received 30,000 orders on the very first day. The remaining customers for the first 25 lakh handsets were to be selected on first-come-first-served basis as the company received about seven crore registrations before the payment gateway crashed.
Later, the company decided to return the money to the customers who pre-booked the Rs.251 device on the first day of the sale.