In a first of its kind ruling, the Madras High Court has held that cryptocurrency constitutes a legally protected form of property in India. The court ruled that digital tokens, though intangible, are capable of being held in trust and protected under law, providing clarity on the legal status of virtual digital assets in India.
Justice N. Anand Venkatesh delivered the judgment on October 25 in the case Rhutikumari vs. Zanmai Labs Pvt. Ltd. & Ors., while deciding an application filed under Section 9 of the Arbitration and Conciliation Act, 1996. The petitioner, Rhutikumari, had sought protection for her 3,532.30 XRP coins held on the WazirX exchange, which were frozen following a cyberattack in July 2024.
Rs 1.98 Lakh Investment Frozen After Hack
The applicant informed the court that she had invested Rs 1,98,516 through WazirX in January 2024, but her cryptocurrency holdings were unlawfully frozen after the exchange, operated by Zanmai Labs Pvt. Ltd. reported a massive cyber breach in July 2024.
The exchange had announced the theft of Ethereum and ERC-20 tokens valued at approximately USD 230 million, prompting it to block all user withdrawals and trading.
WazirX’s Defence and the Singapore Connection
Represented by Senior Advocate Satish Parasaran, Zanmai Labs argued that it merely acted as a distributor in India, while the custody of user assets rested with a Singapore-based entity, Zettai Pte. Ltd. Following the cyberattack, Zettai approached the Singapore High Court, which approved a “scheme of arrangement” to proportionally distribute the remaining assets among affected users.
However, the petitioner’s counsel, Advocate D. Ravichander, countered that her XRP tokens were not part of the stolen ERC-20 assets, and freezing her account amounted to wrongful interference with her property rights.
Court Upholds Jurisdiction and User Rights
Rejecting the company’s objections on jurisdiction, the High Court observed that since the petitioner’s assets were located in India and the WazirX app was accessed from Chennai, the plea was maintainable under Section 9.
Citing the Supreme Court’s decision in PASL Wind Solutions (P) Ltd. v. GE Power Conversion India (P) Ltd., Justice Venkatesh held that Indian courts have authority to protect assets within their jurisdiction, even if the arbitration seat lies outside India.
Cryptocurrency is “Property”, not currency
In a detailed analysis, Justice Venkatesh examined global precedents, including rulings from the UK, Singapore, US, and New Zealand, to determine the legal nature of cryptocurrencies. Referring to the New Zealand High Court’s decision in Ruscoe v. Cryptopia Ltd. (in Liquidation), he noted that digital tokens are “a type of intangible property… capable of being held on trust.”
Applying this reasoning, the judge concluded: “Judging from the above two decisions, there can be no doubt that cryptocurrency is a property. It is not a tangible property nor a currency. However, it is a property capable of being enjoyed and possessed in a beneficial form.”
The court further cited Section 2(47A) of the Income Tax Act, 1961, which classifies cryptocurrencies as “virtual digital assets”, reinforcing their legal recognition under Indian law.
No “Socialisation of Losses”
On the contentious issue of whether unaffected user assets could be frozen to offset the platform’s hacking losses, the court categorically ruled against such action. Justice Venkatesh observed that users holding unaffected tokens cannot be penalised for losses suffered by others, calling the idea of “socialising” losses “unreasonable and unsupported by contract.”
The court also referenced the Bombay High Court’s recent decision in Zanmai Labs Pvt. Ltd. v. Bitcipher Labs LLP (October 7, 2025), which rejected a similar argument and held that crypto exchanges have a fiduciary duty to safeguard user assets held in trust.
Interim Relief Granted to Investor
Recognising Rhutikumari’s XRP holdings as her personal property, the court directed Zanmai Labs to furnish a bank guarantee worth Rs 9.56 lakh in her favour, to be renewed periodically until arbitration proceedings conclude.
The interim protection will remain in effect until the arbitral tribunal is constituted and issues further orders under the dispute resolution clause of the WazirX user agreement.
The judgment marks a major development in India’s evolving crypto jurisprudence, setting a precedent for the protection of digital assets under property law.
