If someone from India were to send bitcoins to obtain service from a person from another country or to buy something from a company abroad like overstock how would it come into the law?
if we are to treat bit coin is an asset, it would not come under FEMA, right?
could it violate any other law?
As of now there exists no such rule or law for us Indians.
Unless government declares and accepts Bitcoins as a commodity or as a currency there would be no official reason to state what you are doing with your bitcoins - whether it be in India or outside of it.
But when it comes to encashing bitcoins for Indian currency (rupees); you'd be better off declaring that as a sale of virtual goods and pay tax on the entire value of bitcoins encashed where it'd be considered as an income.
However you can buy services with bitcoins and that would not require any declaration from your end - then it would be the headache of the service provider.