The Court was hearing a plea filed under Section 9 of the Arbitration and Conciliation Act, 1996 against WazirX
The Madras High Court on Saturday held that cryptocurrency qualifies as property under Indian law, capable of ownership and being held in trust. [Rhutikumari v. Zanmai Labs Pvt Ltd].
Justice Anand Venkatesh held that while cryptocurrency is intangible and not legal tender, it possesses the essential characteristics of property.
“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 said.
The ruling came in a petition filed by an investor (applicant) whose XRP holdings on the WazirX platform were frozen after a 2024 cyberattack.
The applicant had invested ₹1,98,516 in January 2024 on the WazirX exchange platform operated by Zanmai Labs, purchasing 3,532.30 XRP coins. A portfolio account was allotted to her and registered with her mobile number and email address.
On July 18, 2024, WazirX announced on its website that one of its cold wallets had been compromised in a cyberattack that resulted in the loss of Ethereum and Ethereum-based tokens (ERC-20).
The exchange said it had suffered losses of approximately US$230 million, following which it froze all user accounts including that of the applicant thereby, preventing her from accessing or trading her XRP holdings.
The applicant contended that her assets were distinct from the stolen Ethereum tokens and were held by WazirX as a custodian in trust. She sought an injunction under Section 9 of the Arbitration and Conciliation Act, 1996 to prevent the company from redistributing or reallocating her portfolio.
The respondents, Zanmai Labs and its directors including Nischal Shetty, opposed the plea.
They stated that the exchange’s Singapore-based parent company, Zettai Pte Ltd, had initiated restructuring proceedings after the cyberattack and that a scheme of arrangement approved by the Singapore High Court required all users to share losses on a pro-rata basis.
It was argued that Zanmai Labs merely operated the Indian rupee leg of transactions while the crypto wallets were maintained by Zettai, and that the proceedings in Singapore would determine how assets were to be distributed.
Justice Venkatesh devoted a large part of the 54-page judgment to analysing how cryptocurrency fits within established legal notions of property.
The Court observed that although digital tokens consist merely of data on a blockchain, they are definable, identifiable, transferable and capable of exclusive control through private keys—qualities sufficient to confer a proprietary character.
Referring to Ahmed GH Ariff v. CWT and Jilubhai Nanbhai Khachar v. State of Gujarat, Justice Venkatesh noted that “property” under Indian jurisprudence encompasses “every species of valuable right and interest.”
The Court relied on international precedents including the New Zealand High Court’s decision in Ruscoe v. Cryptopia Ltd (in liquidation) and the UK High Court ruling in AA v. Persons Unknown, both of which held that cryptocurrencies are a form of property that can be held on trust.
The judgment also recorded that Section 2(47A) of the Income Tax Act, 1961 recognises cryptocurrencies as virtual digital assets.
“In Indian law regime, the crypto currency is treated as a virtual digital asset and it is not treated as a speculative transaction. This is in view of the fact that the investment made by the user is converted into crypto currency, which is capable of being stored, traded and sold. Crypto currency is termed as a virtual digital asset and is governed under Section 2(47A) of the Income Tax Act, 1961,” the Court said.
The objection that the Madras High Court lacked jurisdiction on the ground that the arbitration was seated in Singapore, was also rejected by the single-judge.
Referring to the Supreme Court’s ruling in PASL Wind Solutions Pvt Ltd v. GE Power Conversion India Pvt Ltd (2021), the Court held that Indian courts can grant interim protection under Section 9 where assets situated in India require protection.
The Court observed that the applicant had transferred funds from her Kotak Mahindra Bank account in Chennai to purchase crypto assets on the WazirX platform and that she accessed the platform from within India. On that basis, a part of the cause of action was held to have arisen within the territorial jurisdiction of the Madras High Court.
Justice Venkatesh also noted that Zanmai Labs was a registered reporting entity under the Financial Intelligence Unit (FIU) in India, whereas its Singapore parent, Zettai Pte Ltd, and its former international partner, Binance, were not registered entities under Indian law. This distinction, the Court said, further established the domestic nexus of the applicant’s claim.
“In the present case, it is the first respondent, which got registered as a reporting entity and is, therefore, authorized to handle crypto currency in India. Neither the Zettai nor Binance is registered as a reporting entity in India and hence, they are not authorized to handle crypto currency within India or operate the platform,” the Court held.
On the merits, Justice Venkatesh found that the applicant’s XRP holdings were unaffected by the July 2024 cyberattack, which involved Ethereum-based tokens. He held that applying the Singapore restructuring scheme to unrelated assets was unsustainable.
The Court recorded that the applicant’s holdings, 3,532.30 XRP coins, were distinct from the Ethereum-based tokens affected by the hack:
“What were held by the applicant as crypto currencies were 3532.30 XRP coins. What were subjected to cyber attack on 18.7.2024 in the WazirX platform were ERC 20 coins, which are completely different crypto currencies not held by the applicant.”
After finding that the applicant’s XRP assets were unaffected by the hack and that cryptocurrency is property capable of ownership and enjoyment, the Court granted interim protection.
