The Madras High Court in recent case Rhuti Kumari Versus Zanmai Labs (P) Ltd. has clarified that cryptocurrency qualifies as a legally protectable asset, capable of ownership and enjoyment, while granting interim relief to an investor whose digital tokens were frozen on the “WazirX” platform after a major cyber breach.

In an order passed by Justice N Anand Venkatesh, the Court drew guidance from earlier Supreme Court judgments that interpret the term property in broad and inclusive terms. Relying on Ahmed G.H. Ariff v. Commissioner of Wealth Tax and Jilubhai Nanbhai Khachar v. State of Gujarat, the Court noted that even though cryptocurrency is neither a physical object nor recognized as legal tender, it still possesses all attributes of property including the ability to be owned, transferred, and held in trust.

The Court further observed that Indian law already treats cryptocurrency as a Virtual Digital Asset, referring to Section 2(47A) of the Income Tax Act, 1961, which reinforces its status within the legal and financial framework.

Case Background

The petitioner, Rhutikumari, purchased 3,532.30 XRP tokens worth approximately Rs. 1.98 lakh in January 2024 through WazirX. Her access to the tokens was blocked after a large-scale July 2024 cyberattack resulted in the loss of nearly USD 230 million worth of Ethereum-based tokens, prompting the exchange to freeze multiple user accounts.

She argued that her XRP holdings were stored in a separate wallet segment and were not part of the compromised assets, and therefore should not be subject to the freeze.

The platform operator, Zanmai Labs Pvt. Ltd., contended that:

1. User assets were managed by foreign entities, and thus not held in trust by Zanmai,
2. A Singapore-based restructuring process governed disputes, and
3. The user agreement required arbitration in Singapore, making the case non-maintainable in India.

Court’s Reasoning

The Court disagreed, holding that:

1. Indian courts can grant interim protection even when arbitration is to be conducted abroad.
2. The investor’s asset was accessed and held through a platform operating in India.
3. The idea of distributing losses across all users, especially when the petitioner’s tokens were not affected by the hack, had no contractual basis.

Direction Issued

To protect the value of the petitioner’s investment during the pending arbitration, the Court directed Zanmai Labs to either:

1. Furnish a bank guarantee, or
2. Deposit ₹9.56 lakh into an escrow account.

This ensures that the petitioner’s cryptocurrency value is preserved until the dispute is resolved.