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Madras High Court holds that cryptocurrency is within the purview of ‘property’ and is capable of being held in trust
The Madras High Court (“Madras HC”), in its recent judgment in Rhutikumari vs. Zanmai Labs Private Limited and Ors.[1], held that ‘cryptocurrency’ is a virtual digital asset governed under Section 2(47A) of the Income Tax Act, 1961, and is within the purview of ‘property’ capable of being held in trust, enjoyed and possessed in beneficial form.
Brief facts
Zanmai Labs Private Limited (“1st Respondent”) is a wholly-owned subsidiary of Zettai Pte Ltd. (“Zettai”), a company based out of Singapore. The 1st Respondent founded a cryptocurrency exchange platform called ‘WazirX’ (“Platform”), which allowed for: (a) trading pairs involving Indian Rupee (“INR”) on the one hand and supported cryptocurrency on the other hand; and (b) Indian resident users to add to their INR balance by depositing Indian Rupees from their registered bank account to the 1st Respondent’s bank account using regulated channels. The Indian users can redeem their INR balance by placing a withdrawal request to the 1st Respondent, upon which request, the INR balance is transferred to the Indian resident users’ registered bank account through regulated channels. Under (b) above, the 1st Respondent merely acts as the user’s duly appointed agent, to whom the payment is due, and does not operate a payment system.
In and around 2019, group entities by the name and style of ‘Binance’ acquired the Platform and licensed the same to the 1st Respondent to act as a distributor within the territory of India for a compensation. However, in 2023, Binance ceased providing services to the Platform, resulting in a dispute between Zettai and Binance. Owing to Binance withdrawing infrastructure support to the Platform, Zettai stepped into the shoes of Binance and held custody of the cryptocurrency related assets associated with the Platform to safeguard the interest of the Platform users whereas the 1st Respondent handled the INR wallets.
Rhutikumari (“Petitioner”) invested INR 1,98,516 (Indian Rupees one lakh ninety-eight thousand five hundred and sixteen) or 3,532.30 (three thousand five hundred and thirty-two point three zero) XRP coins in the Platform. In other words, the Indian currency that was invested by the Petitioner, after conversion into XRP coins, was stored in the wallet maintained by the 1st Respondent, in its custody.
In July 2024, the Platform suffered a major cyberattack leading to the loss of Ethereum and Ethereum based tokens to the tune of USD 234,000,000 (US Dollars two hundred and thirty-four million). Following this, the 1st Respondent immediately froze the accounts of all users, including the Petitioner, and prevented trading or liquidation of their cryptocurrencies. Following the cyberattack, Zettai devised a solution for the benefit of the Platform’s users through a scheme of arrangement under the Singapore Companies Act, 1967. The provisions of the said legislation would provide a mechanism for a fair and orderly manner of distribution of the cryptocurrency tokens pursuant to the scheme under the supervision of the Singapore Courts. Singapore Courts, on October 13, 2025, rendered a finalised scheme of arrangement wherein all users of the Platform, including the Petitioner herein, would be paid on pro-rata basis, owing to insufficient cryptocurrency tokens to satisfy unsecured claims of the users.
Meanwhile, the users of the Platform are governed by a WazirX user agreement which contains an arbitration clause governed by the arbitration rules of the Singapore International Arbitration Centre (SIAC). The Petitioner being aggrieved approached Madras HC by filing a petition under Section 9 of the Arbitration and Conciliation Act, 1996, (“Arbitration Act”) seeking pre-arbitration injunctive relief as against the 1st Respondent from interfering with the Petitioner’s access/use of her account held with the Platform and subjecting it to any re-distribution/reallocation/reapportionment.
Issues
The twin questions that were considered by the Madras HC for adjudication in the present case was:
- whether the petition under Section 9 of the Arbitration Act was maintainable before the Madras HC; and
- whether the Petitioner’s cryptocurrencies can be adjusted against a completely different cryptocurrency held in a separate wallet that was subject to losses due to the cyber-attack.
Findings and analysis
In relation to the first issue, relying on the judgment of the Supreme Court of India in PASL Wind Solutions (P) Ltd. vs. GE Power Conversion India (P) Ltd[2] and the proviso to Section 2(2) of the Arbitration Act, the Madras HC held that the Petitioner operated the Platform through her phone from her ordinary place of residence being India. Accordingly, the Petitioner was restrained from trading and liquidating her crypto currency holdings in the Platform, giving raise to cause of action, rendering the petition maintainable.
In relation to the second issue, the Madras HC at the outset took benefit of how multiple jurisdictions have considered the nature of cryptocurrencies, with El Salvador embracing bitcoin as legal tender, China imposing an outright ban, United Kingdom, Singapore and New Zealand classifying cryptocurrency as property, and the US lacking a unified framework of its regulation, i.e., classifying it as both commodity and security by different federal agencies. Further, the Madras HC delves into what the nature of ‘cryptocurrency’ is and whether cryptocurrency can stricto sensu be considered a ‘property’. The Madras HC, taking the benefit of the decision in Ahmed G.H. Ariff vs. CWT[3] which dealt with the definition of property as under the repealed Article 19(1)(f) of the Constitution of India and Jilubhai Nanbhai Khachar vs. State of Gujarat[4] which dealt with the definition of property as under Article 300A of the Constitution of India, concluded that ‘cryptocurrency’ is a property capable of being held in trust despite not being a ‘currency’ or a tangible property. It further held that the cryptocurrency is treated as a virtual digital asset governed by Section 2(47A) of the Income Tax Act, 1961 and not a speculative transaction. In other words, the investment made by a user upon conversion into cryptocurrency is capable of being stored, traded and sold. Further, the Madras HC relied upon the observations of the Bombay High Court in Zanmai Labs Private Limited vs. Bitcipher Labs LLP[5] on a similar plea that held that the cryptocurrencies being virtual digital assets held electronically are held in trust with a fiduciary duty owed to the owners of such asset. If the assets are held in the custody of a person under the agreement, it is for the person in whose custody those assets are to be held accountable for the custody of the assets. It would not be open for that person to state that the assets were handed over by him to yet another person, who has no privity to the agreement, without the consent of the person whose assets were handed over to him in custody.
Conclusion
This judgment rendered by the Madras HC is a landmark ruling in the crypto landscape as it recognises crypto currency as ‘property’ under law. The judgment has granted investors enforceable rights and protections including the right to own, trade and transfer the virtual digital asset like any other asset. The judgment has not only clarified that exchange platforms hold the investor assets in trust with a fiduciary duty owed to the investors but has further affirmed Indian courts’ jurisdiction over disputes involving investor’s assets located in India even where foreign-based platforms have been involved.
This Prism has been prepared by:
|
Bhavya Sriram |
Mahemaa Senthilkumar |
Pratiksha Easwar |
For more details, please contact [email protected].
[1] 2025:MHC:2437 (decided on October 25, 2025)
[2] 2021 (7) SCC 1
[3] 1969 (2) SCC 471
[4] 1995 Supp (1) SCC 596
[5] Commercial Arbitration Petition (L) No. 11646 of 2025 dated October 7, 2025
