Rhutikumari vs Zanmai Labs Pvt. Ltd. & Ors – Recognition Of Cryptocurrencies As Property By The Madras High Court

    By Akanksha Vatsa

Introduction

The Madras High Court’s judgment in Rhutikumari v. Zanmai Labs Pvt. Ltd. (delivered by Justice N. Anand Venkatesh on 25 October 2025) marks a landmark moment in India’s legal treatment of cryptocurrency and virtual digital assets (“VDAs”). For the first time, an Indian court of record has recognised cryptocurrencies as a form of property, i.e., something that can be owned, enjoyed, transferred, and even held in trust. This recognition gives real legal shape to digital assets, allowing holders to seek traditional protections such as injunctions, fiduciary remedies, and preservation orders, just as they would for any other form of property.

The case arose from a significant cyberattack on the WazirX cryptocurrency exchange, following which users found their digital assets frozen. In response, WazirX’s Singapore-based parent company, Zettai, proposed a restructuring scheme under Singapore law that sought to “socialise” the losses by distributing the impact of the hack across all users, including those whose assets had not been compromised. The petitioner, Rhutikumari, challenged this approach, asserting that her 3,532 XRP tokens were stored in a segregated wallet and remained entirely unaffected by the cyberattack, yet she was being compelled to bear losses suffered by others.

She approached the Madras High Court under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim protection of her digital assets and an injunction restraining the exchange from reallocating or diminishing her holdings. The dispute raised two crucial legal issues: whether cryptocurrency qualifies as “property” under Indian law, and whether Indian courts could exercise jurisdiction despite the restructuring process being initiated in Singapore.

On jurisdiction, the Court adopted a pragmatic, cause-of-action-based approach. Justice Venkatesh held that Indian courts may intervene where a substantial part of the cause of action arises in India, notwithstanding foreign arbitration or restructuring proceedings. Since the investments were made through Indian banking channels on a platform operated by an Indian entity, the Court assumed jurisdiction. Importantly, by recognising cryptocurrency as property, the judgment lays a foundational framework for judicial protection of digital assets in India and marks a significant step in aligning Indian law with evolving technological realities.

Facts Of The Case

WazirX began as a homegrown Indian cryptocurrency exchange, originally owned and operated by Zettai and its affiliates. In November 2019, the global crypto giant Binance announced its commercial partnership with WazirX. After this, the business structure became layered, where Binance managed the crypto side, i.e., the wallets and trading infrastructure, while the Indian entity, Zanmai Labs Pvt. Ltd. (hereinafter “Zanmai” the first respondent in this case), took charge of the Indian-rupee wallets and local banking operations. Together, they maintained the brand name “WazirX”. However, this dual structure with one part operating in India and the other abroad became the root of later disputes over who truly controlled user assets and who bore legal responsibility.

By mid-2022, cracks began to appear in the Binance–WazirX relationship. Binance gradually pulled away from the arrangement, and on 26 January 2023, it terminated wallet access and technical support, effectively cutting WazirX off from its crypto infrastructure.

In February 2023, Binance publicly confirmed that it had severed ties with the platform. To keep the exchange running, Zettai stepped back in. It quickly entered into an agreement with Liminal Infrastructure (operated by Answer Eleven Pte. Ltd., Singapore) on 31 January 2023 to take over custody and management of user wallets. Previously, the crypto tokens stored in Binance-managed wallets were now migrated to new wallets under Liminal’s control. This marked a key operational shift; the Indian platform’s crypto assets were now sitting in wallets managed by a different foreign entity.

On 18 July 2024, WazirX suffered a major cyberattack, described in court as one of the largest breaches in Indian crypto history. The hackers targeted certain wallets, mainly those holding ERC-20 tokens, and siphoned off assets worth around USD 230–235 million. This wiped out a significant portion of the platform’s token reserves, leaving it unable to meet user claims in full. To deal with this crisis, Zettai proposed a restructuring scheme under Singapore’s Companies Act, seeking to distribute the remaining assets through a court-supervised arrangement. Users were consulted through platform polls and blog posts, and about 95% of respondents supported a temporary moratorium while the scheme was considered by the Singapore High Court.

Among the affected users was Rhutikumari, the petitioner, where she had purchased 3,532.30 XRP tokens (“tokens”) on WazirX in January 2024, using Indian rupees. Her tokens, however, were stored in a different wallet, not among those that were hacked. Despite this, after the cyberattack, she was locked out of her account, and there was a looming possibility that her untouched XRP might still be included in the restructuring plan or “socialised” to cover platform-wide losses. This potential “haircut” a forced loss sharing prompted her to approach the court.

While her case was developing in India, Zettai’s restructuring plan was being examined in Singapore. After a few rounds of modifications, the Singapore High Court approved a revised scheme on 13 October 2025. At the same time, related arbitration and court proceedings in India, including one before the Bombay High Court and an arbitral tribunal, were dealing with similar questions about whether user losses could be pooled and shared. Those proceedings had already rejected a blanket “socialisation” of losses, limiting any haircut to around 45% and only for users holding ERC-20 tokens, not for unaffected assets like XRP.

Even as the Singapore restructuring was moving ahead, Rhutikumari approached the Madras High Court under Section 9 of the Arbitration and Conciliation Act, 1996, seeking urgent interim protection. She asked the court to restrain Zanmai Labs and related entities from redistributing or interfering with her XRP tokens, and to direct the company to secure the value of her claim through a bank guarantee or escrow deposit.

Issues

1. Whether cryptocurrencies qualify as property under Indian law?
2. Whether an exchange can impose loss-sharing on unaffected users without contractual authority?
3. Whether the Madras High Court can grant Section 9 interim relief when the arbitration is seated in Singapore but assets have an Indian nexus?
4. What is the custodial or fiduciary duty of an Indian exchange toward user VDAs, and how does a cyberattack (force majeure) affect ownership rights?

Petitioner’s Arguments

Counsel for Rhutikumari (“Rhuti”) argued that Rhuti’s tokens were her identifiable property, stored in a wallet unaffected by the July 2024 cyberattack, and could not lawfully be included in any loss-sharing scheme. The counsel contended that Zanmai acted only as a custodian or trustee and owed fiduciary duties to protect user assets.

Relying on Ruscoe v. Cryptopia (NZ, 2020), AA v. Persons Unknown (UK, 2019), ByBit v. Ho Kai Xin (Singapore, 2023), and Indian precedents like Ahmed G.H. Ariff v. CWT (1969), Rhuti maintained that cryptocurrencies qualify as property under Indian law, further supported by Section 2(47A) of the Income Tax Act, 1961.

She also argued that the Madras High Court had jurisdiction under Section 9 since the transactions and assets were India-linked. The High Court accepted her contention, relying on PASL Wind Solutions (P) Ltd. v. GE Power Conversion India (P) Ltd., which affirmed that Indian courts may grant Section 9 relief in foreign-seated arbitrations where assets are located in India. Accordingly, the Court held the application to be maintainable.

Finally, she submitted that the cyberattack did not extinguish ownership rights, and the Singapore restructuring scheme could not bind her without consent, making interim protection essential to preserve her assets.

Respondent’s Arguments

Counsel for Zanmai argued that the dispute was part of the larger restructuring before the Singapore High Court and that seeking interim relief in India was premature and misplaced. They maintained that Zanmai did not hold or control the petitioner’s crypto assets. The Indian entity only managed rupee transactions and user onboarding, while the crypto wallets were operated abroad first by Zettai, then by Liminal Infrastructure. Hence, Zanmai could not be held responsible for the losses caused by the July 2024 cyberattack.

The Respondent called the attack a force majeure event, protected under the platform’s terms of use, which allowed temporary suspension of services without liability. Respondent also relied on the Singapore restructuring scheme, approved by over 95% of users, arguing that it was a fair, court-sanctioned plan that bound all users, including the petitioner. Respondent further contended that since the assets were held abroad and under Singapore court supervision, the Madras High Court had no authority to intervene. Respondent further pointed out that the petitioner had not yet initiated arbitration, making her Section 9 plea premature.

Finally, Respondent defended the “socialisation” plan as a practical and equitable solution to an unprecedented loss, arguing that the petitioner’s attempt to seek separate protection went against the collective interest of all users.

Judicial Reasoning And Ratio

Justice N. Anand Venkatesh’s judgment in Rhutikumari v. Zanmai Labs Pvt. Ltd. stands out for the clarity with which it brings order to a legally new and complex area i.e, the treatment of cryptocurrency under Indian law. The Court moved step by step, first defining the nature of cryptocurrency, then deciding whether interim relief under Section 9 could be granted, and finally addressing the duties of exchanges, the effect of force majeure, and the implications of the Singapore restructuring scheme.

A. Cryptocurrency as Property (Legal Characterisation)

At the heart of the decision lies a bold yet reasoned conclusion: cryptocurrency is property under Indian law. Justice Venkatesh observed that the term currency is misleading when applied to digital tokens as they are not sovereign money but market-valued digital assets, whose worth depends on what buyers and sellers attribute to them. Yet, the Court held that such assets have definable, identifiable, and transferable characteristics that make them capable of ownership.

To support this, the Court drew from Indian precedents like Ahmed G.H. Ariff v. CWT (1969) and Jilubhai Nanbhai Khachar v. State of Gujarat (1995), both of which interpret “property” broadly to include every possible interest capable of enjoyment and transfer, whether tangible or intangible. Justice Venkatesh applied these principles to hold that VDAs are “capable of being enjoyed and possessed (in a beneficial form)” and “capable of being held in trust.”

The Court then looked to global jurisprudence AA v. Persons Unknown (UK, 2019), Ruscoe v. Cryptopia (New Zealand, 2020), and ByBit Fintech Ltd. v. Ho Kai Xin (Singapore, 2023), all of which recognised digital tokens as property. Synthesising these, Justice Venkatesh explained that each cryptocurrency unit is a unique, identifiable digital entry on a blockchain, controlled through private keys. This control reflects ownership, and the ability to transfer it satisfies the test of possession and proprietary interest.

In his words, cryptocurrencies “are not tangible property nor a currency, yet are property capable of beneficial enjoyment.” Using the “Neti, Neti” analogy from Internet and Mobile Association v. RBI (2020), he acknowledged that while digital assets defy rigid definition, their economic and proprietary reality cannot be denied.

B. Nexus and Maintainability under Section 9

Once cryptocurrency was recognised as property, the Court examined whether it could grant interim protection under Section 9 of the Arbitration and Conciliation Act, 1996. Relying on PASL Wind Solutions v. GE Power Conversion India Pvt. Ltd. (2021), Justice Venkatesh held that Indian courts can grant interim relief even when arbitration is seated abroad, provided the assets or cause of action have a substantial Indian nexus.

He found such a nexus here: the petitioner purchased the tokens in India, using Indian rupees through an Indian bank, and traded on a platform operated by Zanmai Labs, an Indian company registered with the Financial Intelligence Unit (“FIU”). Thus, despite the Singapore restructuring, the Madras High Court had territorial jurisdiction to protect assets located in India and prevent irreparable loss pending arbitration.

C. Custodial and Fiduciary Obligations of Exchanges

Justice Venkatesh reaffirmed that when users deposit cryptocurrencies on an exchange, the platform assumes custodial and fiduciary obligations similar to those of a trustee or bailee. Drawing on the Bombay High Court’s decision in Zanmai Labs Pvt. Ltd. v. Bitcipher Labs LLP (2025), he held that exchanges hold user assets in trust and cannot reallocate or use them to cover other users’ losses without express consent or contractual authority. The fiduciary principle, he noted, applies equally to digital assets what matters is control and trust, not physical possession.

D. Force Majeure and Ownership

The Court accepted that a cyberattack may qualify as a force majeure event, temporarily excusing performance or service suspension. However, Justice Venkatesh made a crucial distinction: force majeure cannot extinguish ownership rights in unaffected assets. Even in extraordinary circumstances, users retain title to their tokens unless a contract clearly authorises redistribution. The “socialisation of losses” proposed by the exchange therefore lacked legal basis, at least as far as the petitioner’s unaffected XRP holdings were concerned.

E. Cross-Border Scheme and Socialisation of Losses

The Court acknowledged the Singapore High Court’s approval of Zettai’s restructuring scheme (13 October 2025) but refused to treat it as automatically binding on the petitioner. Since her contractual relationship was with Zanmai Labs (India) and she was not a party to the Singapore proceedings, the scheme could not be used to erode her ownership rights. Justice Venkatesh held that the “socialisation” of losses lacked contractual support and that majority approval by other users could not override individual proprietary rights.

F. Principle of Interim Protection

Finally, drawing again from the Bombay High Court’s reasoning in Bitcipher, Justice Venkatesh emphasised that Section 9 exists to preserve the subject matter of arbitration. Given that the petitioner’s tokens were unaffected by the hack, she was a vulnerable party entitled to protection. Accordingly, the Court directed Zanmai Labs to provide a bank guarantee or escrow deposit of ₹9.56 lakh, representing the value of her holdings, until the arbitral tribunal decided the matter.

In essence, the Court’s reasoning rests on a simple but far-reaching idea: digital assets are real property interests, and their holders deserve the same legal protection as any other property owner, even in a cross-border, technology-driven environment.

Analysis

The Madras High Court’s ruling in Rhutikumari v. Zanmai Labs marks a careful and progressive development in Indian jurisprudence. It brings digital assets within the fold of property law while keeping the reasoning rooted in established principles rather than novelty. The Court achieves a doctrinal synthesis: it recognises that VDAs possess the same core qualities as other forms of property, definability, identifiability, exclusive control, and transferability, and therefore deserve legal protection. Drawing on Ahmed G.H. Ariff and Jilubhai Nanbhai Khachar for the broad meaning of “property” and taking guidance from common-law decisions like AA v. Persons Unknown and Ruscoe v. Cryptopia, Justice Venkatesh placed cryptocurrencies within an existing legal framework rather than inventing a new one.

Once VDAs are treated as property, a whole range of established proprietary remedies becomes available to users: injunctions, preservation orders, and even tracing or equitable relief where misappropriation occurs. The Court’s own order directing Zanmai to furnish a bank guarantee or deposit funds in escrow demonstrates that such remedies can be applied meaningfully even in the digital context. Equally significant is the Court’s understanding of exchanges as fiduciaries. By framing the exchange–user relationship in terms of trust and custodial duty, the judgment moves disputes about custody and loss from the narrow field of contract law into one that recognises duties of care, loyalty, and accountability. This will have major consequences if exchanges face insolvency, as assets held in trust do not merge with the estate of the insolvent entity.

Justice Venkatesh also drew a firm distinction between temporary suspension of services, which may be justified under a force majeure clause, and the permanent loss of ownership, which cannot be justified without express contractual authority. This distinction adds precision to future readings of exchange terms and consumer contracts. The doctrinal move is cautious but consequential: the Court did not equate digital tokens with traditional movable property, but rather showed that existing legal categories, if applied functionally, are flexible enough to protect ownership in a digital environment.

Procedurally, the Court’s application of PASL Wind Solutions has reaffirmed the ability of Indian courts to grant interim protection under Section 9 of the Arbitration and Conciliation Act when the assets or cause of action have a substantial connection to India, even if arbitration or restructuring is taking place abroad. This recognition restores faith in domestic interim jurisdiction, especially in cross-border digital disputes where Indian users transact in rupees, through Indian banks, on platforms that operate partly from India. The Court’s approach ensures that users are not left without remedy simply because the platform’s parent company or infrastructure lies overseas. At the same time, the Court respected arbitral autonomy, limiting itself to preservation rather than final adjudication, and leaving questions of binding effect or redistribution to the tribunal.

From a regulatory perspective, the judgment creates new expectations. By treating exchanges as custodians bound by fiduciary duties, it pressures them to maintain proper segregation of assets and to disclose their custody structures with clarity. It also implicitly nudges Indian regulators to move beyond the current tax-based or anti–money laundering lens and to create a coherent legal framework for custody, insolvency, and investor protection. Recognition under Section 2(47A) of the Income Tax Act, the Court observed, is only a starting point; regulation must now evolve to address custody norms, forensic audits, and cross-border recognition.

Commercially, the ruling may transform how crypto exchanges and related businesses structure their operations. If user assets are treated as trust property, they will not be counted as part of the exchange’s insolvency estate, fundamentally altering creditor hierarchies and risk assessments. The refusal to allow “socialisation” of losses without contractual consent limits the power of parent entities to pool and redistribute assets, ensuring that users’ tokens cannot be swept into foreign restructuring schemes without their agreement. This will influence how wallet management, custody agreements, and licensing arrangements between Indian and foreign entities are drafted in the future.

At the same time, the Court’s recognition of proprietary rights in digital tokens raises practical enforcement challenges. Establishing ownership on-chain, tracing stolen tokens through multiple wallets, and proving control of private keys will demand a new level of technical and evidentiary sophistication. Courts and arbitral tribunals will increasingly need expert testimony, blockchain forensics, and procedural standards for digital evidence. Justice Venkatesh’s decision, though focused on one dispute, implicitly calls for the legal system to adapt its evidentiary methods to the technology it is now asked to govern.

Despite its significance, the judgment remains cautious and balanced. It does not declare all cryptocurrencies to be trust property automatically, nor does it overstep into the domain of policymaking. Instead, it confines itself to preserving the petitioner’s rights and safeguarding the value of her assets until the arbitral tribunal gives a final ruling. In doing so, it strengthens the protective capacity of Indian law without undermining contractual autonomy or international comity. The result is a decision that is both pragmatic and forward-looking, one that recognises the realities of a digital economy while staying anchored to the principles that have long defined property and trust law.

Bearing Of The Case On Law — Author’s Opinion

Rhutikumari v. Zanmai Labs marks a thoughtful and much-needed step in bringing clarity to an area where both users and regulators have long been uncertain. By recognising VDAs as a form of property that can be protected through trust and fiduciary principles, the Madras High Court has given investors and practitioners a clear legal framework to safeguard their rights. This recognition not only promotes fairness for users caught in platform failures but also builds investor confidence and aligns India’s approach with leading common-law jurisdictions such as the UK, New Zealand, and Singapore.

The strength of the judgment lies in its balance and restraint. It acknowledges the proprietary nature of digital assets without forcing them into outdated legal categories. It respects the arbitral process and foreign restructuring frameworks but refuses to let them override the rights of Indian users who did not consent to those proceedings. Most importantly, the Court’s practical remedy directing Zanmai to provide a bank guarantee or escrow ensures that the petitioner’s assets are protected while the larger dispute plays out.

Yet, the case also exposes the regulatory vacuum in India’s treatment of digital assets. While the Court has done well to provide interim protection through existing principles, there remains an urgent need for comprehensive legislation. Clear rules on custody standards, client-asset segregation, cross-border insolvency, and forensic procedures are essential if India is to avoid piecemeal, case-by-case decisions that increase uncertainty and costs.

To conclude, the case should be seen not only as a protective precedent for users but also as a call to action for lawmakers and regulators. Until a robust statutory framework is built, judgments like this will continue to serve as important guideposts helping courts, exchanges, and investors navigate the evolving landscape of digital assets in India.