2025 Supreme(Online)(Mad) 79835

IN THE HIGH COURT OF JUDICATURE AT MADRAS
N.ANAND VENKATESH, J
Rhutikumari – Appellant
Versus
Zanmai Labs Pvt. Ltd. – Respondent
Original Application No.194 of 2025

The court determined it has jurisdiction to grant interim relief protecting cryptocurrency assets under the Arbitration and Conciliation Act, recognizing cryptocurrencies as property and the need for fiduciary responsibility.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 9 - Injunction sought to protect crypto currency assets from interference during pending arbitration proceedings - Jurisdictional issues regarding arbitral seat addressed - Court held it has jurisdiction as part of the cause of action arose within its jurisdiction - Cyber attack on the crypto exchange resulted in freezing of applicant's account, limiting access to holdings - Court must ensure that the applicant's assets are preserved until resolution of disputes. (Paras 1-3, 10, 11, 60, 67)

(B) Maintainability of Application - Court finds application maintainable under Section 9 despite objections regarding arbitration seat being outside India - It determined prima facie existence of jurisdiction based on local actions taken by the applicant. (Paras 6, 10, 11)

(C) Nature of Cryptocurrency - Court acknowledges cryptocurrency as property capable of being held on trust, though not a physical asset - Various precedents discussed to establish the legal standing and ownership rights. (Paras 41-49)

(D) Role of User Agreement - Court notes the significance of agreement between the parties in determining rights and obligations regarding custody of assets. (Paras 51, 56, 58) (E) Court Findings - The applicant is entitled to interim protection pending resolution of the asset's claim, emphasizing the fiduciary duty to safeguard user assets on platform. (Paras 60-68)

Facts of the case:
The applicant, an investor in a cryptocurrency platform, sought an injunction to protect her holdings of XRP coins after the platform froze her account in the wake of a cyber attack, impacting the platform's assets and thereby limiting access to her investment.

Findings of Court:
The court ruled that the applicant is entitled to an interim bank guarantee for security until the arbitration is resolved, highlighting the need for protection against the potential erosion of her cryptocurrency holdings.

Issues: The case revolved around whether the court had the jurisdiction to adjudicate under Section 9 of the Arbitration Act, the status of cryptocurrency as property, and the implications of a Singapore court's scheme approved regarding a cyber attack on the platform.

Ratio Decidendi: The court held that despite the foreign arbitration seat, it could hear the application as a part of the cause of action arose locally. Furthermore, it affirmed cryptocurrency's status as property, necessitating protection until the resolution of the arbitration proceedings.

Result: Application disposed of with directions for bank guarantee or escrow deposit to secure cryptocurrency assets pending arbitration.