Corporate Crypto Assets in India: Post‑Rhutikumari Legal Vacuum and the Case for Targeted Legislation

I. Background: Why Rhutikumari vs Zanmai Labs Matters

In Rhutikumari v. Zanmai Labs Pvt Ltd, decided in March 2024, the Madras High Court delivered a path‑breaking order with significant consequences for corporate handling of digital assets. The Court unequivocally recognised that cryptocurrencies constitute “property” in the civil law sense – a movable asset that can be owned, transferred, and contested before a court of law.

This ruling filled a conspicuous gap left by the legislature: until this decision, Indian statutes had never clearly characterised the legal nature of cryptocurrencies. While regulators and the tax authorities have focused on compliance and anti‑money laundering issues, the question of whether a crypto token is property, security, currency, or something else remained unanswered.

The Madras High Court addressed one slice of that puzzle – it stated what crypto is for civil law purposes (property), but also implicitly what it is not:

  • It did not declare cryptocurrencies to be legal tender
  • It did not treat them as securities or regulated financial instruments
  • It confined itself to acknowledging crypto as a class of property capable of legal protection

While this clarification is welcome, it exposes a much deeper issue: Indian corporate law still has no explicit framework indicating whether, and how, a company may:

  • Hold crypto as part of its treasury
  • Record it properly in its books
  • Distribute it to shareholders or creditors
  • Deal with it during insolvency or winding up

This article examines that corporate law vacuum, contrasts India’s position with the structured regime in El Salvador, and proposes a staged legislative roadmap to address the problem.

II. The Rhutikumari Decision: Property Status but Narrow Recognition

The dispute in Rhutikumari v. Zanmai Labs Pvt Ltd arose from claims over cryptocurrency balances on the WazirX platform operated by Zanmai Labs. The petitioner approached the Madras High Court seeking civil remedies in relation to certain crypto assets allegedly impacted by a cyberattack.

Faced with the question of whether the court could grant protection over such assets, the High Court was required to determine whether cryptocurrencies qualify as “property” under civil law principles.

B. Court’s Determination

The Court accepted the petitioner’s claim and held that cryptocurrencies:

  • Fall within the meaning of property under civil law
  • Are transferable
  • Can be owned, claimed, and defended before a court
  • May be the subject of civil disputes and judicial protection

Crucially, this characterisation was not drawn from any specific statutory definition; it was a judicial inference based on general principles relating to property rights.

At the same time, the Court was careful not to attribute a monetary or regulatory status to crypto:

  • It did not elevate crypto to legal tender
  • It did not treat it as a security subject to capital markets regulation
  • It did not classify it as a regulated financial product under existing financial laws

The judgment therefore provides a limited but important recognition: cryptocurrencies are property but nothing more (yet) in the eyes of Indian law.

C. Implications for Corporate Holdings

For companies, this opens a theoretical door: if crypto is property, a company could hold it as an asset, unless expressly restricted by law or by its own constitutional documents. However, in practice this raises several unresolved questions:

  • How should such holdings be classified in the accounts?
  • What is the tax treatment under the current regime?
  • How should crypto be dealt with in insolvency or liquidation?

The Rhutikumari decision does not address these corporate law issues, which remain stuck in a regulatory grey zone.

III. Corporate Law Silence: Can a Company Legitimately Hold Crypto?

A. Companies Act, 2013 – An Unspoken Space

The Companies Act, 2013 does not specifically mention cryptocurrencies or other digital assets:

  • There is no direct prohibition on holding cryptocurrencies
  • There is no explicit authorisation or special regime either

Under general corporate law principles, a company is free to own any type of property, unless:

  1. A statute prohibits such ownership, or
  2. Its Memorandum of Association or Articles restrict such activities

If the reasoning in Rhutikumari is read expansively, one can argue that a company may indeed hold cryptocurrency as property. However, this theoretical permissibility collides with several practical and legal obstacles.

B. Accounting Classification: No Clear Standard

The Institute of Chartered Accountants of India (ICAI) has not laid down binding, India‑specific accounting guidance on how companies should classify cryptocurrencies in their financial statements. This leads to uncertainty on whether corporate crypto holdings should be treated as:

  • Financial assets
  • Intangible assets
  • Inventory

Each category triggers different consequences under Indian Accounting Standards, including:

  • Measurement methodology (cost, fair value, revaluation)
  • Recognition of gains and losses
  • Impairment testing
  • Disclosure requirements

Without authoritative guidance, different companies may adopt inconsistent treatments, leading to:

  • Distorted financial reporting
  • Audit disputes
  • Difficulty in comparing companies’ financial health

C. Taxation: Harsh but Incomplete Regime

The Finance Act, 2022 introduced a special tax regime for virtual digital assets (VDAs), including cryptocurrencies. Under Section 115BBH of the Income Tax Act 1961:

  • Transfers of VDAs attract a flat 30% tax
  • Set‑off of losses against other income is severely restricted