Crypto Currency Is A Property Which Is Capable Of Being Held In Trust: Madras High Court
The Madras High Court said that in Indian law regime, the crypto currency is treated as a virtual digital asset and it is not treated as a speculative transaction.
Justice N. Anand Venkatesh, Madras High Court
The Madras High Court has affirmed that crypto currency is a property which is capable of being held in trust.
The Court was deciding an Application filed under Section 9(1)(ii)(a), (d) and (e) of the Arbitration and Conciliation Act, 1996 (A&C Act), seeking an injunction order.
A Single Bench of Justice N. Anand Venkatesh held, “… 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 Bench said that in Indian law regime, the crypto currency is treated as a virtual digital asset and it is not treated as a speculative transaction.
Advocate D. Ravichander represented the Applicant, while Senior Advocate Satish Parasaran represented the Respondents.
Brief Facts
The Respondent company was engaged in the business of running crypto currency exchange platform under the name and style of WazirX. The Applicant made an investment of Rs. 1,98,516/- in the exchange platform of the Respondent during January 2024. A portfolio account was allotted to the Applicant by giving a specific identification number and it was registered with both the e-mail address as well as the mobile contact number of the Applicant. By investing the said amount, the Applicant purchased 3,532.30 XRP Coins, which were retained in the custody of the Respondent. The Indian currency that was invested by the Applicant after conversion into XRP Coins was stored in the wallet maintained by the Respondent. The Respondent held XRP Coins in its capacity as the custodian and in trust on behalf of the Applicant.
In July 2024, the Respondent made an official announcement on its website that one of its cold wallets had been subjected to cyber attack, that on account of the same, there has been loss of Ethereum and Ethereum based tokens (ETH) - ERC 20 coins stored in the concerned crypto wallet and that therefore, it suffered a loss of USD 230 Million. Thereafter, the Respondent immediately froze the crypto account/portfolio of the Applicant and prevented from having access or to trade with her XRP Coins or liquidate the same. WazirX user agreement contained a dispute resolution mechanism by referring the dispute for arbitration under the Arbitration Rules of Singapore International Arbitration Centre (SIAC) with the seat of arbitration at Singapore. Under these circumstances, the Application was filed before the High Court for an interim injunction order.
Court’s Observations
The High Court in view of the above facts, observed, “… 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 noted that the Supreme Court recognized the RBI’s power to make decisions concerning virtual currencies, but struck down its 2018 ban on banking support to crypto businesses for being disproportionate and this Judgment became a landmark in balancing regulatory caution with the constitutional freedom to trade, paving the way for more nuanced policymaking in India’s evolving crypto landscape.
“… 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”, it added.
One moot question that arose for consideration was as to whether the ERC 20 coins, which were the subject matter of cyber attack and which were held in a separate wallet resulting in a loss to the Respondent company, can be adjusted against a completely different crypto currency held by the Applicant namely XRP coins in a different wallet.
“This Court is in complete agreement with the above findings rendered by the Bombay High Court wherein it was held that the virtual digital asset held electronically are meant to be held in trust with a fiduciary duty owed to the owners of such asset. 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”, it enunciated.
The Court was of the view that if, ultimately, based on the modified scheme of arrangement approved by the Singapore High Court, the asset held by the Applicant stood eroded substantially, she becomes a vulnerable party, who will be entitled for a protection.
“This is more so since the main issue with respect to the action initiated by the Zettai and its liquidation proceedings before the Singapore High Court and whether it will have a binding effect on the applicant, is a core question, which will be dealt with by the Arbitral Tribunal. Therefore, the applicant will be certainly entitled to an interim protection in exercise of jurisdiction under Section 9 of the Act”, it held.
Conclusion
The Court further said that the contention on the side of the Respondent that the Applicant has not issued a trigger notice till now cannot be put against her in view of the fact that none of the parties had clarity as to how the proceedings before the Singapore High Court is going to end.
“In view of the above, this Court rejects the contention raised on the side of the first respondent that the applicant did not have manifest intention to arbitrate. It goes without saying that the applicant will hereafter issue a trigger notice since the applicant exactly knows where she stands in the light of the order dated 13.10.2025 passed by Singapore High Court”, it also remarked.
The Court, therefore, concluded that the Applicant is entitled to an interim protection under Section 9 of the A&C Act.
Accordingly, the High Court disposed of the Application and directed the Respondent company to furnish a bank guarantee of Rs. 9,56,000/- in favour of the Applicant or to deposit the said sum in an escrow for the purpose of preservation of the subject matter till the arbitration proceedings comes to an end.
Cause Title- Rhutikumari v. Zanmai Labs Pvt. Ltd. & Ors. (Neutral Citation: 2025:MHC:2437)
Appearance:
Applicant: Advocate D. Ravichander
Respondents: Senior Advocate Satish Parasaran, Advocates Vishnu Mohan, and Adithya Reddy.
