RHUTIKUMARI V. ZANMAI LABS: EXPLORING CRYPTO’S STANCE IN THE INDIAN ECONOMY
The intangibility associated with digital assets has always raised doubts and confusion as far as the concept of ownership in Indian law is concerned. However, on the 25th of October 2025, the Madras High Court delivered a decisive judgment in
Rhutikumari v. Zanmai Labs Pvt. Ltd. & Ors.
which provided some much-needed clarity on the conundrum that revolves around the ownership of digital assets—particularly cryptocurrency.
BRIEF FACTS AND FINDINGS
The dispute traces back to January 2024, when Rhutikumari invested about Rs 1.98 lakh to acquire 3,532.30 XRP coins through WazirX, the crypto exchange run by Zanmai Labs. Her holdings became inaccessible when the platform froze accounts following a serious security breach in July 2024 that resulted in the theft of nearly USD 230 million in Ethereum-based tokens.
To protect her assets pending arbitration, she had approached the Court seeking interim relief under Section 9 of the Arbitration and Conciliation Act, 1996. She argued that her XRP holdings were distinct from the stolen assets and thus should not be affected by the freeze. The Court was faced with the task of determining the legal definition of digital property, and the fiduciary responsibility of exchanges in the context of the volatile cryptocurrency sector. Ultimately, the Court recognised cryptocurrency as property that was capable of being held in trust after looking at various judgments from India and other countries, which played a significant role in guiding the Court.The Court referred to the decision of the Supreme Court in
Internet and Mobile Association of India v. Reserve Bank of India
which noted the legal ambiguity surrounding cryptocurrencies and wherein it was held that the definition of virtual currency should be analogised to the Vedic philosophical analysis of negation, “neti, neti” (not this, not that). While cryptocurrency is not “currency” because its value is solely determined by willing buyers and sellers instead of a central authority, and it is not a tangible object, it should have a recognisable legal definition to warrant protection. Another Supreme Court judgment that was referred to in the captioned case was
Ahmed G.H. Ariff v. CWT
which determined that “property” encompasses “every possible interest” that a person may hold or enjoy, possessing a distinguishing proprietary characteristic. Reference was also made to the decision of the Supreme Court in
Jilubhai Nanbhai Khachar v. State of Gujarat
which affirmed that property includes an “aggregate of rights safeguarded by law,” which encompasses both corporeal and incorporeal, tangible and intangible, visible and invisible items. Based on this precedent, the Madras High Court ultimately held that cryptocurrency qualifies as property under Indian law. This holding opens the door to various questions and aspects as discussed below.
RECOGNITION OF CRYPTOCURRENCY UNDER INDIAN STATUTES AS A GOOD, PROPERTY OR SECURITY
Recognition of cryptocurrency has always left scope for interpretation under Indian law; currently, cryptocurrency is recognised as a virtual digital asset and treated as intangible property under the Income Tax Act. India’s stance remains the same by not recognising cryptocurrency as legal commodities, securities or currency.
Recognition as ‘Security’
Under Section 2(h) of the Securities Contracts (Regulation) Act, 1956 (“SCRA”), securities are defined as shares, bonds, debentures and derivatives. The Act does not clearly include cryptocurrency; however, the definition is inclusive by mentioning the term “other marketable securities”.
The Securities and Exchange Board of India (SEBI) has internally deliberated on this classification. If a token is structured like an Initial Coin Offering (ICO) that promises a share of future profits, equity-like rights, or voting power in a centralised enterprise, SEBI could legally argue it fits under “marketable securities” as per the Supreme Court judgment titled
Sahara India Real Estate Corporation Limited v. Securities and Exchange Board of India
wherein the Court held that a marketable security will clearly fall under the ambit of Section 2(h) of the SCRA and that marketable means “capable of being sold”. Hence, there should be no restriction on the transfer of these coins offered through the ICOs for SEBI to have jurisdiction over the same.
An ICO is a method of fundraising driven by cryptocurrency. The entity wishing to raise funds or the issuer makes available for purchase a coin or a token, which is a virtual currency or a cryptocurrency in exchange for cryptocurrency (e.g. Bitcoin or Ether) or fiat currency. However, ICOs remain fundamentally unregulated and strictly discouraged in India.
Recognition as a Commodity/Good
Commodities are a financial group that involves trading of physical goods such as raw materials, gold and silver. They are regulated by agencies such as the Commodity Derivatives Market Regulation Department, and their prices are influenced by supply-demand dynamics, geopolitical events, and storage costs. The Indian government does not recognise cryptocurrencies as commodities, traditional currencies, or securities.
CROSS-BORDER CRYPTOCURRENCY TRANSACTIONS
Under the Foreign Exchange Management Act, 1999 (“FEMA”), all foreign exchange transactions undertaken by persons resident in India are classified into two mutually exclusive categories: current account transactions and capital account transactions, and the regulatory treatment of each is deliberately asymmetric.
According to FEMA, a current account transaction is defined in Section 2(j) as any transaction that is not a capital account transaction, covering routine day-to-day trade, services, interest payments, and family remittances that do not alter foreign assets or liabilities.
Offshore cryptocurrency transactions conducted by Indian residents directly impact their foreign asset portfolios and legal liabilities outside India, drawing strict oversight under Indian tax and foreign exchange laws. According to the Foreign Exchange Management Act, Section 2(e), “capital account transaction” means a transaction which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India or assets or liabilities in India of persons resident outside India. This includes cryptocurrency as a capital account transaction.
TREATMENT OF CRYPTOCURRENCY UNDER CORPORATE INSOLVENCY RESOLUTION PROCESS
The Corporate Insolvency Resolution Process (CIRP) is a process for debt recovery when companies become insolvent; it is operated under the Insolvency and Bankruptcy Code, 2016
(IBC). This process is regulated by the National Company Law Tribunal (NCLT). Upon application by the initiator, a resolution plan is drafted, clarifying the manner in which the company’s property and assets are going to be used for debt recovery.
For the inclusion and use of cryptocurrency in the CIRP process, we must establish that it qualifies as an asset or property. According to Section 3(27) of the IBC, “property” is defined as “money, goods, actionable claims, land and every description of property situated in India or outside India and includes every description of interest, including present or future or vested or contingent interest arising out of or incidental to property.”
As already established, Rhutikumari v. Zanmai Labs Pvt. Ltd. explicitly ruled that cryptocurrency qualifies as “property” under Indian law, giving it scope to be a part of the process.
For now, cryptocurrency’s place in Indian insolvency law is a doctrine waiting for its test case. The IBC’s architecture—a deliberately wide “property” definition under Section 3(27) and the resolution professional’s custody obligations under Sections 17 and 18—gives no principled reason to exclude a corporate debtor’s cryptocurrency holdings from the insolvency estate, yet no NCLT or National Company Law Appellate Tribunal (NCLAT) bench has had to apply that architecture to an actual wallet, private key, or exchange balance. The gap is not conceptual; it is empirical.
CONCLUSION
On recognition, Indian law has settled largely through the tax regime and judicial dicta rather than a dedicated cryptocurrency statute in treating cryptocurrency as property, while stopping short of recognising it as legal tender, a commodity, or (outside the narrow ICO fact-pattern) a security. This “property, not currency” characterisation is not merely academic; it is the hinge on which the other two areas turn. Because cryptocurrency is property and not currency, it cannot benefit from the liberalised, presumption-of-permissibility treatment FEMA extends to current account transactions, which are conceived around trade, services, and income flows rather than asset holdings. Instead, cross-border cryptocurrency dealings default toward the capital account framework under Section 2(e)—a transaction that alters a resident’s assets or liabilities outside India—placing cryptocurrency under FEMA’s more restrictive, permission-based regime even though no schedule or Reserve Bank of India (RBI) regulation yet tells residents exactly how to comply with it. The result is a compliance vacuum: the definition is
wide enough to capture crypto, but the operative machinery to lawfully act within that definition has not been notified.
This piecemeal, definition-by-borrowing approach has kept the law functional in the short term, but it leaves practitioners, resolution professionals, and residents transacting across borders to build compliance on inference rather than statute. Whether through an amendment to the Current Account Transaction Rules, a dedicated FEMA schedule for virtual digital assets, or IBC-specific valuation and custody guidelines, the next meaningful development in this area will likely not be a new judicial pronouncement on what cryptocurrency is—that question is largely settled—but regulatory action on how the law already applicable to it is meant to operate in practice.
[1] Rhutikumari v. Zanmai Labs Pvt. Ltd., 2025 SCC OnLine Mad 9290
[2] Internet and Mobile Association of India v. Reserve Bank of India, 2020 (2) SCR 297
[3] Ahmed G.H. Ariff v. CWT, (1969) 2 SCC 471
[4] Jilubhai Nanbhai Khachar v. State of Gujarat, 1995 Supp (1) SCC 596
[5] Sahara India Real Estate Corporation Limited v. Securities and Exchange Board of India, (2012) 10 SCC 603
The authors of the article are: Mr. Rahul Jain, Partner; Ms. Pranshu Singh, Managing Associate; and Mr. Raghav Sachdev, Associate – II
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