I. Introduction
In Rhutikumari v. Zanmai Labs Pvt Ltd In March 2024, the Madras High Court passed a historic verdict, in which it accepted the existence of cryptocurrencies as property, a transferable and movable object and could be owned, disputed, and defended by a court of law. The legal character of digital assets is something that the Indian legislature has neglected, and which was defined by the Court. Although the move can be considered a courageous one from a legal perspective, it speaks about a gap that exists in India, as there is no such legal framework that clarifies whether or not a business can store, account, or distribute cryptocurrencies as a corporate asset, particularly for winding up. This blog examines that disparity, contrasts it with that of the El Salvador model, and justifies the need to enact legislationwithout further delay.
II. The Rhutikumari Ruling
The conflict was over claims to cryptocurrency deposits onthe WazirX platform (run by Zanmai Labs). The petitioner applied for civil relief regarding crypto assets held after a cyberattack. The Madras High Court accepted the claim and ruled that cryptocurrency falls within the definition of property under civil law, and can be owned, transferred, and litigated over. This was not stated in any of the statutory provisions. The Court made no statement that crypto is a legal tender, security or a regulated instrument. It claimed that it is property, which is an acknowledgement, but a narrow one. It leaves each question of corporate law fully open. It is an asset of the company to have crypto, and there are several practical benefits to it, like:
- It protects the company’s money. The supply of crypto,such as Bitcoin, is limited and its value is more likely to retain compared to normal cash in times of inflation. As the value of the rupee is reduced, Bitcoin does not automatically lose its value.
- It facilitates international payment. Transfer of money to other countries via banks may take days and is very expensive. Crypto would allow an organisation to make payments to foreign suppliers or staff in a few minutes with no intermediaries and no delays.
- It earns passive income. A company is not necessarily required to simply have crypto. It has the potential to finance crypto through Decentralised Finance opportunities and get an interest that can frequently be tremendous compared to any bank on a fixed deposit.
- It can be used to raise funds. Cryptocurrencies allow businesses to raise money more quickly, cheaply, and with fewer limitations compared to traditional organizations undergoing an IPO process that takes a long time. It makes the company ready for the future. The whole financial system in the world is shifting towards digital. Firms that invest in crypto today will be much stronger financially in the economy tomorrow as compared to those that wait.
III. The Corporate Law Vacuum: Can a Company Hold Crypto as an asset?
The Companies Act, 2013, is silent on digital assets. It neither prohibits nor expressly authorises companies to hold cryptocurrency. Under general corporate law principles, a company may hold any asset not prohibited by statute or its own Memorandum of Association. If we read the Rhutikumarijudgement with a wide interpretation, then the company canhold crypto as property, but this comes at the cost of a lot of problems.
Firstly, the question of accounting classification arises wherethe Institute of Chartered Accountants of India (ICAI) has not issued any binding guidance on how companies must classify crypto on their balance sheets. Is it a financial asset, an intangible asset, or inventory? Each classification needs a different recognition and obligations under Indian Accounting Standards.
Secondly, the tax regime is punishing on corporate structuring. The Finance Act, 2022, introduced a 30% flat tax on virtual digital asset (VDA) transfers under Section 115BBH of the Income Tax Act, but it says nothing about whether corporate holdings receive any special treatment, depreciation benefit, or rights.
At last, there is the winding-up problem. If a company holds any cryptocurrency and is being wound up under the Insolvency and Bankruptcy Code, 2016 (IBC) or Part XX of the Companies Act, the question arises: how should the liquidator treat these assets? The IBC’s definition of ‘assets’is broad, and when applied to Rhutikumari’s reasoning, it could potentially classify crypto as realisable assets of the corporate debtor. The liquidator would be required to realise and distribute them, but how? On which exchange? At what valuation date? Who holds the private keys? These questions have no statutory answers, and their absence creates serious risks of corporate corruption.
IV. A Comparative Lens: El Salvador’s Framework
The El Salvador’s Bitcoin Law (2021) provides a useful comparator. To accompany this law, El Salvador rolled out a supporting network of 200 Bitcoin ATMs, introduced a new digital bitcoin wallet app called Chivo, and distributed $30 worth of Bitcoin to every citizen to start the change. While primarily designed to make Bitcoin legal tender for individuals, its implementing regulations, Digital Assets Issuance Law, called as the LEAD law, consist of a total of 47 articles and cover almost everything addressing corporate usewritten for the digital age.
- According to LEAD, a digital asset is anything of value that is managed and sent digitally with blockchain-type technology. It also states very clearly that digital assets do not qualify as shares or securities. They fall under their own distinct category. whereas in India, no such classification of crypto is assigned. Is it a currency? A commodity? A security? It means different tax regulations; LEAD addresses this by merely stating: it is its own thing, its own rules.
- Its article 6 to 9 create a regulator that actually has authority called the National Digital Assets Commission CNAD kind of like SEBI, but only for digital assets. In India, SEBI regulates shares, RBI regulates currency, and IBBI handles insolvency. But no one has been given clear authority over digital assets.
- Under Articles 29 and 39, it prohibits fraud and any unlicensed activity. LEAD has a clear list of what is unlawful: acting without a licence, giving false statements to investors, price manipulation, and, irrespective of the anti-money laundering requirements. The punishments are severe in nature. In 2023, the Prevention of Money Laundering Act in India was amended to include crypto companies. However, the issue is that any company can act in the crypto world without a licence at all; they only have to comply with the PMLA, while LEAD makes the two interconnected: you cannot get a licence without complying with the PMLA. It is a stronger system by far.
- Its companies registry accepts digital asset disclosures, and auditors are trained to verify wallet balances through public blockchain verification, something India’s audit system does not have.
The lesson from El Salvador is not that India should make Bitcoin legal tender. It is that legislative intentionality matters. Once Parliament decides to legislate on corporate crypto holdings, its accounting, insolvency, audit, and foreign exchange must be addressed simultaneously. A gradualjudicial approach cannot achieve this systemic need forbinding regulations.
V. Proposed Reforms for India
India does not need to do everything at once. The step procedure with the regulatory framework can help solve the crypto problem.
1. Cryptocurrency (Regulation) Act: Parliament must enact a VDA statute that defines digital assets as a distinct property class, specifies which entities may hold them, and sets minimum governance requirements for corporate treasuries. The long-pending Cryptocurrency and Regulation of Official Digital Currency Bill must finally be tabled and debated.
2. Amendment to the Companies Act, 2013: The CompaniesAct, Schedule III, which provides guidance on how to declare their financial statement, should be amended to mandate disclosure of any material holding of a digital asset. Directorsreports are supposed to take digital risks like assets. The SEBI requirements for digital asset public offerings should be revised, as with LEAD, and the disclosure and certifier requirements should remain the same.
3. Amendment to the IBC, 2016: The definition of ‘property of the corporate debtor’ should expressly include VDAs. IBBI Regulations should state the process for liquidators to identify, secure private key access, value, and liquidate crypto assets.
VI. Conclusion
Rhutikumari is not an end in itself but a judicial stepping stone. The Madras High Court has already applied established legal principles to new realities, which is what the courts have to do when the legislature is actionless. Nevertheless, Indian businesses need systemic legislation which only the Parliament can provide for cryptocurrency. They have been working in a legal fog , as how they will account as well as the risk of bankruptcy. Investors and creditors are entitled forbetter. It is thought that the post-Rhutikumari require a Corporate Crypto Act is more necessary today. The Indian corporate law will continue to exist in a vacuum, which is useless and, at worst, dangerous to investor protection and the integrity of the bankruptcy process.
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