Madras High Court Recognises Cryptocurrency as Property, Says It Can Be “Held in Trust”

In an order passed by Justice N Anand Venkatesh in an arbitration plea seeking interim relief, the court relied on two Supreme Court rulings, Ahmed G.H. Ariff v. Commissioner of Wealth Tax and Jilubhai Nanbhai Khachar v. State of Gujarat, which broadly define the concept of “property,” and observed that these principles apply equally to cryptocurrencies

It held “Judging from the above two decisions, there can be no doubt that “crypto currency” is a property. It is not a tangible property nor is it a currency. However, it is a property, which is capable of being enjoyed and possessed (in a beneficial form). It is capable of being held in trust.”

The Court also noted that under Indian law, cryptocurrency is classified as a “virtual digital asset and it is not treated as a speculative transaction” under Section 2(47A) of the Income Tax Act, 1961.

It was hearing a plea by one Rhutikumari, who invested about Rs 1.98 lakh in January 2024 to buy 3,532.30 XRP coins on the WazirX platform operated by Zanmai Labs Pvt. Ltd. Her account was frozen after a July 2024 cyberattack that wiped out nearly USD 230 million worth of Ethereum-based tokens from the exchange's wallets. She approached the court seeking protection of her investment, arguing that her XRP holdings were separate from the stolen assets and should not be affected by the freeze.

Zanmai Labs argued that it did not hold users' cryptocurrencies in trust, as those were managed by foreign entities including Binance and later Zettai Pte. Ltd. The company also said a Singapore court–approved restructuring plan governed user redress and claimed the case was not maintainable in India because the user agreement required arbitration in Singapore.

The court disagreed. Referring to earlier precedents, the court said that Indian courts can indeed pass interim orders to protect assets located in India even if arbitration takes place abroad.

It ruled, “prima facie, it must be held that the asset namely the crypto currency was held by her in India by means of WazirX platform and that the applicant has been prevented from using the platform since it has been frozen. Therefore, in the light of the said judgment of the Hon'ble Apex Court, the above application filed under Section 9 of the Act is maintainable before this Court.”

The court also rejected the company's claim that losses from the hack could be spread across all users. Citing the Bombay High Court's observations in a similar case, the court said the idea of “socialising losses” has no basis in the user agreement and violates the trust owed to investors.

It noted “If the asset is stored digitally on the WazirX platform and that because of a cyber attack, if the entire operation stood frozen, whether it can be held that the asset that was possessed by the applicant will stand eroded due to security lapse or security breach and such erosion can be validly spread across all users of the platform and more particularly when such breach did not take place in so far as the asset held by the applicant in a different wallet namely XRP Coins, is a matter to be adjudicated in terms of the agreement.”

Holding that the petitioner-investor is entitled to interim protection, the court directed Zanmai Labs to furnish a bank guarantee or deposit Rs 9.56 lakh in escrow to preserve the value of the applicant's cryptocurrency until the arbitration proceedings are completed.

Case Title: Rhutikumari v. Zanmai Labs Pvt Ltd and Ors

Citation: 2025 LiveLaw (Mad) 373

Case Number: Original Application No.194 of 2025

For Applicant: Advocate D Ravichander

For Respondents: Senior Advocate Satish Parasaran and Advocate Vishnu Mohan (for Zanmai Labs); Advocate Adithya Reddy (for other respondents)

Click here to read/download order