Use of spy camera is legal or not is totally depends on situation. using it for a surveillance operation, or using at your home for a valid reason. In-fact in a public place to record without knowledge of next person it is offense. Even if using CCTV visible camera, one should place a caption board like "You are under CCTV"
http://www.legalserviceindia.com/lawforum/index.php?topic=7824.0
http://www.legalserviceindia.com/lawforum/index.php?topic=7824.0