The Madras High Court allowed an investor’s plea under Section 9 of the Arbitration and Conciliation Act, 1996, declaring cryptocurrency as a form of property under Indian law. The Court directed the respondents to furnish a bank guarantee or deposit an equivalent amount to protect the investor’s frozen holdings until arbitration proceedings are completed.
The petitioner, an individual investor using the WazirX platform, alleged that her cryptocurrency holdings were arbitrarily frozen after a cyberattack in July 2024 that stole over USD 230 million worth of assets from WazirX wallets. She filed an application seeking an injunction restraining Zanmai Labs and its directors from redistributing or reassigning her assets and requested interim protection pending arbitration under the Singapore International Arbitration Centre (SIAC) Rules.
The WazirX exchange, founded by Zanmai Labs in India (the respondents), underwent multiple structural changes when Binance (a global crypto exchange) announced its acquisition in 2019. Later disputes arose over ownership and control between Zanmai and Binance.
In July 2024, following the massive cyber hack, the exchange froze all user accounts and announced a “recovery and restructuring plan” approved by the Singapore High Court. As part of that plan, all users were subject to an across-the-board reduction in digital credits. The petitioner, whose XRP holdings were unaffected by the hack, challenged this one-size-fits-all freeze as wrongful and discriminatory.
The Bench comprising Justice N. Anand Venkatesh held that, despite the arbitration seat being Singapore, the plea was maintainable in India since the investor’s assets and bank transactions originated in Chennai, relying on PASL Wind Solutions Pvt. Ltd. v. GE Power Conversion India Pvt. Ltd.[1]
The Court ruled that the respondents, as an Indian entity handling rupee payments, are responsible for preserving investor interests and cannot hide behind the corporate veil of Binance or foreign affiliates.
The Court held that though cryptocurrency is not legal tender, it qualifies as intangible property capable of ownership and trust. The Court also reiterated that digital assets fit the constitutional concept of property protected under Article 300A of the Indian Constitution. The Court referenced Internet and Mobile Association of India v. RBI[2] to affirm that while government regulation is vital, individuals’ ownership of crypto assets must receive legal protection.
The respondents were ordered to provide financial security equivalent to the frozen asset’s value, ensuring no dissipation of the investor’s holdings until resolution by the arbitral tribunal.
Appearances:
For Applicant : Mr.D.Ravichander
For R1 For R2 to R5 : Mr.Satish Parasaran, SC
For Mr.Vishnu Mohan : Mr.Adithya Reddy
Cases relied on:
- PASL Wind Solutions (P) Ltd. Vs. GE Power Conversion India (P) Ltd., 2021 (7) SCC 1
Cases referred to:
- Commodity Futures Trading Commission Vs. My Big Coin Pay, , 334 F. Supp. 3d 492 (D.Mass. 2018)- USA
- Securities and Exchange Commission (SEC) Vs. Ripple Labs Inc., 682 F.Supp. 3d 308 (S.D.N.Y. 2023)- USA
- SEC Vs. Terraform Labs Pte. Ltd., 2023 WL 8944860 (S.D.N.Y. Dec. 28, 2023)- USA
- AA Vs. Persons Unknown, 2019 EWHC 3556 (Comm)- UK
- Janesh Vs. Unknown Person, 2022 SGHC 264- Singapore
- ByBit Fintech Ltd. Vs. Ho Kai Xin, 2023 SGHC 199- Singapore
- Ruscoe v Cryptopia Ltd (in Liquidation), 2020 NZHC 728- New Zealand
- Internet and Mobile Association of India Vs. Reserve Bank of India, 2020 (2) SCR 297- India
- Ahmed G.H. Ariff Vs. CWT, 1969 (2) SCC 471- India
- Jilubhai Nanbhai Khachar Vs. State of Gujarat, 1995 Supp (1) SCC 596- India
[1] (2021) 7 SCC 1
[2] 2020 (2) SCR 297