Some of my friends are talking about creating an adult blog or forum which would drive money for from advertisements. Is such a thing allowed by Indian IT Act 2006 or related cyber laws?

Hi mk_inforum and welcome to INForum!

We interviewed a lawyer recently at:
Indian Domain Name Blog » Indian Domain Law - Interview with Pravin Anand

This is what he had to say:

Are there any restrictions on registering Indian “adult” domains?

The Government of India some years back established the Computer Emergency Response Team, or CERT-IN, as a means to monitor all incoming and outgoing Internet traffic from India. Currently, there is no established law as to which websites the government censors, or when. In the past, mainly pornographic and anti-establishment political websites have been blocked.

Adult web sites are restricted as being against public morals and decency. Most registrars and hosts will not register or host web sites which contain adult contents including pornography, warez sites etc. However the discretion as to what the “adult” material is has been left entirely to the registrars and hosts of web sites.

Common sense would say that anything the Centre can mess up, they will. So why take the chance with a dot-in extension?