Cryptocurrency as Property: Did the Madras High Court Overstep or Fill a Necessary Void?

By: Myra Khanna, a 4th year B.A.LL.B. law student at Maharashtra National Law University, Mumbai

Factual Matrix

In this case, the applicant had purchased 3,532.30 XRP coins, a type of cryptocurrency (worth ₹1,98,516), that were held in her wallet on WazirX, a crypto trading platform operated by Zanmai Labs (“Zanmai”). In July 2024, WazirX suffered a cyberattack resulting in losses of approximately $235 million. This cyberattack targeted ERC-20 tokens, which are Ethereum-based digital assets different from the applicant’s XRP holdings, which remained unaffected. Unable to recover from losses caused by the cyberattack, WazirX’s Singapore-based parent, Zettai Pte. Ltd., initiated restructuring proceedings, later approved by the Singapore High Court. The scheme proposed a pro-rata distribution of remaining assets, effectively “socialising” losses across all users, including those whose holdings were untouched, such as the applicant.

The core issue was whether the applicant was merely an investor subject to the Singapore High Court’s restructuring scheme or whether she held independent property rights over her XRP coins. The Court held the latter, granting interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, (“A&C Act”) and affirming that Zanmai held users’ crypto assets in trust.

The Court’s Reasoning: Synthesis or Judicial Legislation?

The judgment raises a critical question: Did the Court effectively legislate by recognising cryptocurrency as “property” absent a statutory framework? Understanding this requires examining its reasoning.

A.    The Court’s Approach

The Court began by examining several international precedents from the UK, Singapore, and New Zealand that recognise cryptocurrency as property. To better understand the nature and regulatory status of cryptocurrency, it then referred to the Supreme Court’s (“SC”) decision in Internet and Mobile Association of India v. Reserve Bank of India (“IMAI”), praising it as “a landmark in balancing regulatory caution with constitutional freedom to trade. Further, it examined SC precedents, Ahmed G.H. Ariff v. CWT  (“Ahmed Ariff”) and Jilubhai Nanbhai Khachar v. State of Gujarat  (“Jilubhai”), which define “property” expansively to include intangible and beneficial rights. From this, it concluded: “there can be no doubt that ‘cryptocurrency’ is a property… capable of being enjoyed and possessed (in a beneficial form). It is capable of being held in trust.”

This conclusion appears abrupt. International precedents, while persuasive, are not binding, especially since the SC itself, in IMAI, despite examining international jurisprudence on cryptocurrency, deliberately avoided classification. Moreover, Ahmed G.H. Ariff and Jilubhai addressed “property” in specific contexts: Ahmed Ariff considered whether a beneficiary’s right to Wakf-alal-aulad income constitutes “property” under the Wealth Tax Act, 1957 a question of fiscal assets, not general property rights, while Jilubhai interpreted “property” under Article 300A in the context of state acquisition. The SC in Jilubhai explicitly cautioned that the definition of “property” is inherently context-specific and cannot be defined abstractly.      

Thus, it’s clear, extending such context-bound principles to cryptocurrency, an entirely unregulated asset class, without a clear conceptual linkage, appears unconvincing. However,      other aspects may nonetheless justify the Court’s ultimate conclusion.

B.    Supporting Developments

The Court's position may find firmer footing in at least two developments. First, as the Court notes, cryptocurrency is treated as a “virtual digital asset” (“VDA”) under Section 2(47A) of the Income Tax Act, 1961. While the judgment doesn’t dwell on this, VDAs actually have been judicially recogni     sed as capital assets in Raunaq Prakash Jain v. ITO, which held that “all rights are property, and thereby the right… in Bitcoin… is a capital asset,”; this read with Section 2(14) of the Income Tax Act, 1961, which defines capital assets as “property of any kind”, effectively classifies VDAs, including crypto, as property for tax purposes, a treatment that may gain explicit legislative backing under the proposed Income Tax Bill, 2025. While tax classification alone would not suffice, this statutory basis is firmer than the general property law principles the Court  derives from Ahmed Ariff and Jilubhai.

Second, on the aspect of trust, the Madras High Court isn't the first to hold that cryptocurrency is capable of being held in trust. Three weeks before Rhutikumari, the Bombay High Court in Zanmai Labs Pvt. Ltd. v. Bitcipher Labs LLP (“Bitcipher Labs”), (arising from the same WazirX attack) upheld an arbitral order holding that “virtual digital assets… are meant to be held in trust with a fiduciary duty owed to the owners.” The Madras High Court endorsed this reasoning fully.

The Court’s reasoning was largely associative, drawing on international precedents and Indian property jurisprudence, but it stops short of fully articulating the logical connections. Other considerations, both on the merits and practical necessity, also seem to have influenced the judgment, as discussed later in this piece.

An immediate question arises: if the conclusion was reached on these bases, why had no Indian court definitively classified cryptocurrency before the Madras High Court? For this, it’s worth noting the SC’s observations in IMAI.

Diverging Views on Crypto: Madras High Court and Supreme Court

The SC in IMAI addressed whether the Reserve Bank of India could restrict banking services to crypto businesses; the SC extensively analysed international precedents (including AA v. Persons Unknown 2019 EWHC 3556, later cited in Rhutikumari), recognising crypto as property, yet explicitly refused to classify it.

A.    The SC’s restraint in IMAI 

The Court observed that jurisdictions worldwide describe crypto variously as property, commodity, or payment instrument, but each capture only part of its nature. Drawing on Jain philosophy, the SC likened these classifications to “four blind men describing an elephant… each perceiving only one aspect.” It concluded that crypto is “neither… currency stricto sensu, nor… digital asset… an asset stricto sensu.”

This neti neti (“neither this nor that”) approach reflected deliberate restraint: since the issue concerned only RBI’s regulatory authority, classification was unnecessary. Significantly, however, it observed that “if an intangible property can act under certain circumstances as money… then the RBI can definitely take note of it and deal with it.” This reference to cryptocurrency as “intangible property” was conditional and used to justify the RBI’s jurisdiction, not to grant crypto civil law property status.

The Madras High Court acknowledged IMAI’s neti neti reasoning and itself acknowledged the challenge of “pigeonhole[ing] completely new concepts into existing frameworks.” Yet paragraphs later, it declared “there can be no doubt that “cryptocurrency” is a property,” treating SC’s caution as commentary on technological novelty (at that time) rather than principled refusal to classify.

The question, then, is whether the legal framework and practical realities changed enough by 2025 to justify a clear classification, or if the Supreme Court’s neti neti caution still applies.

B.    Why Classification was Defensible

Several factors suggest the Court’s approach, while methodologically imperfect, was necessary and justified. First, establishing the proprietary nature was imperative for the grant of interim relief. As noted in Part I, the Singapore High Court had already approved Zettai Pte. Ltd.’s restructuring scheme treating all investors as unsecured creditors. Without recognising independent property rights, rather than mere contractual claims, the applicant would have been bound by this foreign order, losing her unaffected XRP coins to socialise losses from tokens she never held. Establishing property rights gave her a stronger position. Moreover, unlike Bitcipher Labs, where the Bombay High Court reviewed arbitral findings under Section 37 of the A&C Act, no tribunal had addressed this threshold question here.  Rhutikumari made a direct determination requiring a clear doctrinal foundation. Interim relief  under Section 9 of the A&C Act requires a protectable interest; while contractual rights might suffice, property rights provide a firmer basis beyond balance-of-convenience considerations.

Moreover, such interpretive extensions follow established common law trends. In State of Maharashtra v. Praful B. Desai (2003) 4 SCC 601, the SC recognised that courts have routinely adapted legal categories to technological change through “updating construction”: “handwriting” under the erstwhile Evidence Act was interpreted to include typewriting, “documents” was expanded to include computer databases, “banker’s books” encompassed microfilms      Similarly, in TCS  v. State of AP, (2005) 1 SCC 308, software was recognised as “goods” despite intangibility. Further, practical necessity also compels judicial engagement. Since IMAI’s adjudication in 2020, crypto disputes, from exchange insolvencies to hacks (WazirX, CoinDCX), have proliferated, causing billions in global losses with Indian exchanges contributing significantly. Courts cannot indefinitely defer classification when citizens face real losses from assets the State taxes but refuses to define.

Conclusion

The core question is not whether courts should recognise crypto as property, but whether they can avoid doing so while adjudicating live disputes over assets the state taxes yet refuses to define. The regulatory stance is untenable: the State taxes crypto gains at 30%, imposes 1% TDS on transfers, yet provides no framework for custody, insolvency, or enforcement of proprietary claims. Citizens are taxed on assets whose legal status remains undefined.

Rhutikumari fills the doctrinal gap left by IMAI (regulatory proportionality) and Parliament (taxation without definition). When the state collects revenue but provides no remedies, judicial action is not overreach but a necessity. The judgment demonstrates the common law’s essential function: resolving disputes the legislature refuses to address.