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Executive Summary
The Madras High Court has delivered a significant judgment that addresses two critical issues facing India's digital asset ecosystem: (i) whether cryptocurrency constitutes property capable of ownership and legal protection under Indian law, and (ii) whether Indian courts can grant interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 in support of foreign-seated arbitrations. In a regulatory environment where cryptocurrency remains largely governed by judicial interpretation rather than comprehensive legislation, the judgment provides important clarity for investors, exchanges, and other market participants. From a business and corporate perspective, the ruling underscores the fiduciary responsibilities of crypto exchanges, the risks arising from custodial models, and the increasing role of Indian courts in safeguarding investor interests in cross-border digital asset disputes.
Background
Zanmai Labs Pvt. Ltd. ("Respondent No.1") is a company incorporated under the Companies Act, 2013. Mr. Nischal Shetty ("Respondent No.2"), Mr. Sameer Mhatre ("Respondent No.3"), Mr. Tushar Patel ("Respondent No.4") and Mr. Muthusamy Iyer ("Respondent No.5") are the Directors of Respondent No.1.
Respondent No.1 is engaged in the business of running a crypto currency exchange platform under the name of WazirX. All the parties who registered themselves on WazirX were governed under a user agreement dated August 1st 2023 ("Agreement"). The Agreement contained an arbitration clause for resolving disputes. As per the Agreement the arbitration was to be conducted under the Arbitration Rules of Singapore International Arbitration Centre ("SIAC") with the seat of arbitration at Singapore.
Ms. Rhutikumari ("Applicant") registered herself on WazirX and accordingly a portfolio account was allotted to her by giving her a specific identification number. The Applicant invested an amount of Rs 1,98,516/- on the WazirX platform and purchased 3,532.30 XRP Coins, which were retained in the custody of Respondent No.1. The Indian currency that was invested by the Applicant after conversion into XRP Coins had been stored in the wallet maintained by Respondent No.1. As on January 17th 2025 the value of the XRP Coins held by the Applicant was Rs 9,55,148.2/.
On July 18th 2024, Respondent no.1 officially announced that one of its cold wallets were subjected to cyber-attack and in view of the same there has been a loss of Ethereum and Ethereum based tokens stored in the wallet. Respondent No.1 suffered a loss to the tune of USD 230 Million due to the cyber-attack.
Following the announcement made on July 18th 2024, Respondent No.1 froze the crypto portfolio account of the Applicant, thereby preventing her from trading with XPR Coins or liquidating the same.
In view of the above circumstances, the Applicant filed the present Application under Section 9 of the Arbitration and Conciliation Act, 1996 ("Act"), seeking for an order of injunction.
Issue Before the Court
- Whether the Hon'ble Court has the jurisdiction to try the present Application?
- Whether the Applicant must be construed as an investor or a proprietor of her holdings i.e. 3,532.20 XRP coins?
- Whether the proceedings before the Singapore High Court, which resulted in the approval of the modified scheme of arrangement, will be binding upon the Applicant?
Court's Analysis
At the outset the Hon'ble Court relied upon the judgment of the Supreme Court in the case of PASL Wind Solutions (P) Ltd. Vs. GE Power Conversion India (P) Ltd. 1("PASL") which dealt with the proviso inserted to Section 2(2) of the Act. The Supreme Court in the case of PASL had held that courts in India can pass interim orders under Section 9 of the Act even in respect of arbitrations seated outside India, provided that at least one party resides in India, the assets of the party are located within India, and the interim measures are required to preserve those assets.
In light of the above legal position, the Hon'ble Court observed the Applicant had used the WazirX platform within India through her mobile device, and her cryptocurrency assets were effectively held in India. As the platform was frozen, preventing the Applicant from trading or liquidating her assets, the Hon'ble Court held that the Applicant's assets required protection. Accordingly, the Hon'ble Court held that the present Application is maintainable, and the Hon'ble Court has the jurisdiction to try the same.
The Hon'ble Court undertook a detailed analysis of the nature and legal treatment of cryptocurrency, acknowledging that it does not fit neatly into traditional definitions of "currency" or "asset." The Hon'ble Court observed that cryptocurrencies differ from government-backed currencies, as their value is derived solely through user consensus and not from government-assured value.
Citing international jurisprudence from jurisdictions such as the United Kingdom, Singapore, and the United States, the Hon'ble Court noted that digital tokens are increasingly recognized as property capable of ownership and transfer despite lacking intrinsic value or asset backing.
Drawing an analogy with dematerialized shares, the Hon'ble Court emphasized that while both exist digitally, shares represent enforceable interests in real companies, whereas cryptocurrencies do not confer any underlying rights. The Hon'ble Court also noted the difficulties and challenges in fitting cryptocurrencies within existing legal frameworks, especially in light of developments such as stablecoins and varied regulatory stances across the globe.
The Hon'ble Court relied on the judgement of the Supreme Court in the case of Internet and Mobile Association of India Vs. Reserve Bank of India2 ("Internet and Mobile Association") and held that the Supreme Court in the case of Internet and Mobile Association, 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.
The Hon'ble Court also relied on the judgment of the New Zealand High Court in the case of Ruscoe Vs. Cryptopia Ltd3 wherein it was held that crypto currencies are a type of property that are capable of being held on trust.
Additionally, relying on the judgment in the cases of Ahmed G.H. Ariff Vs. CWT4 and Jilubhai Nanbhai Khachar Vs. State of Gujarat5 the Hon'ble Court held that crypto currency is a property which is capable of being enjoyed and posed in a beneficial form. The Hon'ble Court further held that crypto currency is capable of being held in trust.
The High Court noted that, under Indian law, cryptocurrency is classified as a "virtual digital asset" under Section 2(47A) of the Income Tax Act, 1961, and is not treated as a speculative transaction. It is considered a convertible asset capable of being stored, traded, and sold.
The Hon'ble Court further rejected the contention of the Respondent No.1 that it had no control over cryptocurrency wallets or digital assets as they were managed by foreign entities Binance and Zettai. The Hon'ble Court held that since WazirX was registered as a reporting entity under the Financial Intelligence Unit (FIU), it was duly authorized to operate and handle cryptocurrency transactions in India, whereas Binance and Zettai were not registered and therefore lacked such authority.
The Hon'ble Court further relied of the judgment of the Bombay High Court in the case of Zanmai Labs Private Limited Vs. Bitcipher Labs LLP6 ("Zanmai Labs") wherein it was held that virtual digital asset held electronically are meant to be held in trust with a fiduciary duty owed to the owners of such asset. The Bombay High Court also held that cyberattacks or force majeure events do not automatically justify "socializing" losses across all users, especially when such assets are held in separate wallets which were not compromised. It emphasized that any such disputes must be resolved strictly in accordance with the terms of the agreement entered into between the parties.
In view of the judgement of the Bombay High Court in the case of Zanmai Labs, the Hon'ble Court held that if the Applicant's crypto assets were substantially eroded due to the modified scheme of arrangement approved by the Singapore High Court on October 13th 2025, hence the Applicant would be a vulnerable party entitled to protection under Section 9 of the Act. It noted that whether the Singapore Court's orders in the liquidation proceedings bind the Applicant is a question to be adjudicated by the Arbitral Tribunal.
Accordingly, the Hon'ble Court directed Respondent No.1 to furnish a bank guarantee for a sum of Rs.9,56,000/- in favour of the Applicant or in the alternative, directed Respondent No.1 to deposit the said sum in an escrow till the arbitration proceedings initiated in terms of the Agreement comes to an end.
Our Analysis
From a corporate and business standpoint, this judgment has far-reaching implications for crypto exchanges, fintech platforms, and other digital asset custodians operating in India. The Court's recognition of cryptocurrency as property capable of being held in trust effectively elevates the standard of care expected from exchanges, placing them closer to traditional financial intermediaries rather than mere technology service providers.
The ruling highlights the commercial risks inherent in custodial business models, where exchanges retain control over user assets, particularly in the absence of clear statutory segregation and insolvency protections. For businesses, this underscores the importance of robust internal controls, clear contractual allocation of risk, and transparent wallet management structures to mitigate exposure arising from cyber incidents and cross-border insolvency proceedings.
The Court's willingness to grant interim relief in aid of a foreign-seated arbitration also reinforces India's pro-arbitration stance, while simultaneously assuring investors that Indian courts will not hesitate to intervene where domestic assets and investor interests are at stake. This is likely to influence how crypto platforms draft dispute resolution clauses, structure asset custody arrangements, and assess jurisdictional risk when operating in or targeting the Indian market.
More broadly, the decision sends a strong signal to the market that regulatory uncertainty will not preclude judicial protection of digital assets, thereby enhancing investor confidence but also increasing compliance and governance expectations for industry participants.
Our Analysis
This judgment reaffirms the principle that Indian courts have the power to grant interim relief under Section 9 of the Act, even when arbitration is seated outside India, provided the assets against which protection is sought are located in India and one party to the arbitration agreement also resides in India.
The judgment also affirms that cryptocurrencies are legally recognized as property capable of ownership, enjoyment, and being held in trust, and are thus entitled to legal protection.
Importantly, the Court rejected the notion that losses arising from cyberattacks can be "socialized" across platform users without strict contractual authority, particularly where assets are maintained in segregated wallets.
From a corporate and commercial standpoint, the decision significantly raises the governance and risk management bar for crypto exchanges and digital asset custodians operating in India. By characterizing user holdings as trust property, the Court exposes exchanges to heightened fiduciary standards, potential balance sheet and insolvency risks, and increased regulatory and investor scrutiny. This will directly influence how such businesses are structured, valued, and diligenced in transactions, with greater emphasis on custody models, asset segregation, cyber-security frameworks, insurance coverage, and cross-border enforcement exposure. While this may increase compliance costs, it also enhances systemic credibility and investor confidence in India's digital asset market.
Footnotes
1. 2021 (7) SCC 1
2. 2020 (2) SCR 297
3. 2020 NZHC 728
4. 1969 (2) SCC 471
5. 1995 Supp (1) SCC 596
6. Commercial Arbitration Petition (L) 11646 of 2025
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