Published on: 17th July 2026
Authored by: Shreeparna Pareek
National Law University, Jodhpur
I. Introduction
Modern cryptocurrency disputes have evolved significantly beyond standard discussions of market volatility and investment risk.[17] Commercial courts are increasingly required to adjudicate complex matters involving platform cyberattacks, systemic exchange restructurings, asset freezes, and the fundamental legal classification of digital holdings.[17] In this developing jurisprudential landscape, the Madras High Court’s interim ruling in Rhutikumari v. Zanmai Labs Pvt. Ltd. stands as a critical benchmark, establishing that cryptocurrency holdings can be legally classified as intangible property deserving of judicial protection.[17]
The dispute arose after the Indian digital asset exchange WazirX suffered a major cyberattack in July 2024.[17] The applicant, who had acquired Ripple (XRP) tokens through the platform, asserted exclusive proprietary ownership over her digital assets, arguing they should remain insulated from external corporate interference.[17] Following the security breach, the platform suspended all trading and withdrawal functionalities, effectively blocking user access to individual asset portfolios.[17] Seeking to protect her holdings, the applicant moved the Madras High Court under Section 9 of the Arbitration and Conciliation Act, 1996, requesting an interim injunction to secure her specific XRP assets.[17]
The domestic litigation quickly intersected with transnational corporate restructuring efforts.[17] Zettai Pte. Ltd., the Singapore-based parent entity of the WazirX platform, initiated restructuring proceedings before the High Court of Singapore, proposing a corporate scheme of arrangement.[17] This scheme contemplated a pro-rata distribution of remaining digital assets among all platform users, effectively socializing the losses generated by the cyberattack across the entire customer base.[17] This corporate strategy raised a profound legal issue: given that the hacker targeted Ethereum-based ERC-20 tokens, could an exchange legally subject a user’s unaffected XRP holdings to a common loss-sharing pool?[17] Resolving this question requires determining whether an exchange user is merely an unsecured contractual creditor or the true titleholder of an independent proprietary interest.[17]
II. Factual Matrix and the Socialization of Losses
The core conflict in the WazirX crisis stems from the material difference between the assets stolen and the assets held by the applicant.[17] The cyberattack explicitly compromised ERC-20 tokens, leaving the applicant’s XRP holdings physically untouched within the exchange’s ledger architecture.[17] Despite this fact, Zettai Pte. Ltd.’s proposed Singaporean restructuring scheme sought to pool all remaining assets to absorb the operational deficit uniformly.[17]
By intervening to recognize cryptocurrency as a form of property, the Madras High Court altered the balance of leverage between commercial exchanges and retail users.[17] When digital holdings are treated purely as personal contractual claims against a platform, users are reduced to ordinary unsecured creditors during an exchange insolvency or restructuring event.[17] Conversely, classifying these holdings as property allows users to assert a distinct interest *in rem*, making the mandatory socialization of corporate losses highly difficult to justify under Indian commercial law.[17] Utilizing one user’s uncompromised assets to cover a platform’s distinct technological losses represents an infringement of property rights that requires clear statutory or contractual authorization.[17]
III. Legal Analysis and Statutory Intersections
The High Court’s reasoning extended far beyond the limited regulatory definitions currently active in Indian legislation:[17]
A. The Transition from Taxation to Proprietary Status
Domestic legislation already acknowledges cryptocurrency for fiscal purposes under the Income Tax Act, 1961, which classifies these holdings as Virtual Digital Assets (VDAs) for revenue collection.[17] The High Court correctly determined that statutory taxation does not automatically grant property status under civil law.[17] To bridge this gap, the Court observed that while cryptocurrency lacks physical form and does not satisfy the legal definition of sovereign currency, it exhibits the core characteristics of property: it can be possessed in a beneficial form, stored, traded, transferred, and held in trust.[17]
B. The Sovereign Backing Paradox
This proprietary recognition introduces a notable jurisprudential tension.[17] Cryptocurrency lacks backing from any central bank or sovereign authority, and its baseline valuation is entirely dependent on speculative market confidence and decentralized software protocols.[17] Traditional fiat currency serves as an official, state-sanctioned index of value, whereas digital assets derive value solely from mutual party agreement.[17] Granting comprehensive property status to an asset class that lacks statutory backing or corporate equity underpinnings creates unique legal challenges, as courts risk providing unintended legitimacy to highly volatile, unregulated instruments.[17]
C. The Theory of Limited Proprietary Recognition
To resolve this tension, the judgment is best interpreted as establishing a doctrine of limited proprietary recognition.[17] Under this framework, cryptocurrency is recognized as intangible property strictly for protective purposes, enabling courts to prevent wrongful account freezing, platform conversion, or arbitrary asset redistribution.[17] This protective designation does not equate cryptocurrency with legal tender, regulated financial securities, or traditional state-backed assets.[17]
IV. Comparative Transnational Perspectives
Evaluating international insolvency and fraud litigation demonstrates that characterizing cryptocurrency as property does not universally guarantee user protection, as outcomes frequently depend on platform terms of service:[17]
- In re Celsius Network LLC (United States): Retail users deposited digital assets into “Earn” accounts, assuming they retained absolute title.[17] Upon the platform’s bankruptcy, the US Bankruptcy Court reviewed the platform’s clickwrap terms of use and concluded that ownership of the cryptocurrency had legally transferred to the company.[17] The assets were absorbed into the bankruptcy estate, reducing the users to unsecured creditors and demonstrating that a general property classification cannot override clear contractual transfers of title.[17]
- Re Gatecoin Ltd. (Hong Kong): The Hong Kong Court of First Instance affirmed that cryptocurrency constitutes intangible property capable of forming the subject matter of a trust.[17] However, the court noted that actual protection depended entirely on the specific terms of the exchange’s user agreement, creating asymmetric outcomes where certain users enjoyed trust protections while others held only unsecured contractual claims.[17]
- CFTC v. My Big Coin Pay (United States): Federal enforcement actions revealed the systemic risks of unregulated digital assets, as promoters falsely claimed their private token was fully backed by gold and integrated with global payment networks.[17] This precedent highlights the risks of expanding property protections to state-unbacked digital assets without robust statutory verification mechanisms.[17]
V. Systemic Implications for Indian Jurisprudence
The interactive dynamics of the Rhutikumari precedent will heavily influence several areas of Indian corporate and commercial law:[17]
A. Restructuring and Insolvency Practice
If Indian courts consistently treat digital tokens as independent property, future domestic insolvency practitioners cannot easily aggregate user-held tokens to settle general corporate debts, altering the architecture of corporate insolvency resolution plans.[17]
B. The Contractual Autonomy of Exchanges
Following the *Celsius* model, digital asset exchanges operating in India will likely update their terms and conditions to enforce explicit title transfers, attempting to neutralize the proprietary protections recognized by the judiciary.[17]
C. The Demand for Legislative Intervention
Ad-hoc judicial interventions under Section 9 of the Arbitration Act cannot substitute for a comprehensive statutory framework.[17] Parliament must enact clear legislation defining digital asset custody standards, exchange liabilities, and specialized loss-distribution protocols.[17]
VI. Conclusion
The Madras High Court’s ruling in Rhutikumari v. Zanmai Labs Pvt. Ltd. marks a notable shift in India’s approach to digital assets, providing a flexible framework to protect retail investors from arbitrary platform adjustments and loss-sharing structures.[17] By looking past the lack of tangible form, the Court acknowledged the economic realities of digital asset ownership within the modern commercial landscape.[17]
However, as international precedents indicate, relying solely on judicial interpretations of “property” creates systemic risks if platform agreements contain conflicting title clauses or hidden terms.[17] Moving forward, the real challenge for Indian jurisprudence will be to maintain this limited proprietary protection as a shield against fraud and conversion, without granting full legal legitimacy to privately issued, state-unbacked digital instruments before a clear statutory framework is established.[17]
Bibliography
Primary Statutory Sources
[17] The Arbitration and Conciliation Act, 1996, No. 26 of 1996 (India).
[17] The Income Tax Act, 1961, No. 43 of 1961 (India).
Judicial Precedents
[17] Rhutikumari v. Zanmai Labs Pvt. Ltd., Original Petition under Section 9, 2024 (Madras High Court).
[17] In re Celsius Network LLC, 647 B.R. 631 (Bankr. S.D.N.Y. 2023).
[17] Re Gatecoin Ltd. (In Liquidation), [2023] HKCFI 914 (High Court of Hong Kong).
[17] Commodity Futures Trading Commission v. My Big Coin Pay, Inc., et al., 334 F. Supp. 3d 518 (D. Mass. 2018).
