Author(s): Bhavya Sharma & K.Anantharaman
Paper Details: Volume 4, Issue 4
Citation: IJLSSS 4(4) 20
Page No: 204 – 214
ABSTRACT
The courts still possess the authority to deliver remedy for violation even if it happens on a blockchain; rather, it is the target of remedy that is different now. The argument being made in this paper is that standard remedies of contracts can still be employed for violations of smart contracts, however, the target of such remedies must not be the code but rather human actors who control it. In theory, this has already been done: the courts of England and Singapore have already shifted their focus of equitable relief from codes to wallet owners and other intermediaries. What this work aims to show is that courts of India did not need to develop anything new; they arrived at the same approach independently. The judgment of the Madras High Court of 2025 in Rhutikumari v Zanmai Labs Pvt Ltd which recognized cryptocurrency as property capable of being kept in trust and provided with an interim remedy against an Indian intermediary despite presence of arbitration clause outside of India serves as an illustration of the entire idea.[1]
CHAPTER 1: INTRODUCTION
BACKGROUND AND PURPOSE
Smart contracts are defined as on-chain contracts, which means they are contracts that are programmed into software and are executed instantly across different blockchain networks. Thanks to their self-executing nature, these types of contracts do not rely on intermediaries which contributes to their swiftness, transparency and reliability since they do not depend on the existence of any particular institution. However, these are the very advantages of the said contracts, which lead to the issue that will be discussed in this paper: namely, the self-executing nature and the immutability of smart contracts make it hard to use traditional remedies of law once something goes wrong.[2]
Even though the breaches of smart contracts do take place due to different reasons such as programming errors, unreliable information provided by oracles or non-fulfilment of a condition precedent by one of the parties. The real issue for the courts is not the identification of any breach of the contract. The main issue is that it will be impossible to use the remedies of law if the transaction was executed on the blockchain.
RESEARCH QUESTION AND THESIS
This paper explores the question of whether the concepts of damages and injunctions, viewed as two main remedies in accordance with common law under breach of contract, can effectively be applied if the breach occurs within the conditions of immutable blockchain technology. The authors conclude that both remedies apply but only if courts realize that they shouldn’t focus on the code. Damages are still making it possible for victims to recover losses based on the property determination that is widely accepted in the law, while injunctions still block the actions of people who are in charge of keeping the private keys and the bitcoin wallets instead of focusing on the execution of the code. This paper proves that what started in Singaporean and English court practices has later successfully developed in Indian jurisprudence even though India has yet to adopt the relevant legislation on the regulation of virtual assets and smart contracts
AIMS OF THE STUDY
●To see smart contracts as contracts under regular contract law rules, where code provides performance instead of being legal obligation.
●To find out whether compensatory, restitutionary and liquidated damages still remain viable after the property status of a digital asset.
●To determine the extent of legal injunction on executing decentralized services, as well as the change of legal doctrine to relief on individuals not code.
●To study in Indian jurisprudence the applicability of this human-based enforcement mechanism even in the absence of legislation on virtual digital assets.
METHODOLOGY
The study is both doctrinal and analytical, based on case law, legislation, and literature. It mainly uses B2C2 Ltd v Quoine Pte Ltd and CLM v CLN[3] for explaining the general common law position, while Rhutikumari v Zanmai Labs Pvt Ltd is used for analyzing it from the perspective of Indian law. Moreover, it looks at the Indian regulatory environment in which any Indian court will have to operate, especially the taxation of virtual digital assets according to the Income-tax Act, 1961, and the Supreme Court’s decision in the case of Internet and Mobile Association of India v Reserve Bank of India.[4]
SCOPE AND LIMITATIONS
The focus of the paper is limited to the remedies offered under the common law on contracts namely, damages and injunctions and excludes more technical issues, such as those of code auditing or oracle reliability. It is concerned with the legal mechanisms involved and their adaptability to decentralised contracting. Since the case of Rhutikumari involved a centralised exchange platform, not a fully decentralised smart contract, the paper points out where the analysis is applicable to smart contracts, and where it is not.
CHAPTER 2: LEGAL AND THEORETICAL FOUNDATIONS
In the case of using traditional remedies for a breach of a smart contract, two fundamental questions arise – how the contract is classified legally; and how the digital asset is classified. Both these aspects determine the extent to which a court can take action.
SMART CONTRACTS AS LEGAL AGREEMENTS
Courts view the smart contract code in the light of making and executing an agreement and not perceiving the code as a contract; therefore, the provisions of this contract are still implemented as per traditional law principles. A party who creates a defect will still be liable if there is a defect in the performance which occurred due to the smart contract code. The existing principles affecting a traditional contract, such as error, misrepresentation, and duress, will equally apply to smart contracts; error, in this case, is especially important as the parties can fail to understand how it works in reality.
Case Study — B2C2 Ltd v Quoine Pte Ltd (2019), in particular, where a trading algorithm executed trades in cryptocurrency at a price roughly 250 times higher than the prevailing market rate due to a glitch in the system, after which the exchange platform unilaterally reversed the trades.The Singapore Court of Appeal held that the reversal was itself a breach of contract, rejecting the platform’s defence of unilateral mistake and upholding the trades as valid notwithstanding the pricing error.[5]
DAMAGES
The most common remedy in contract law is damages, which serve to provide the injured person with the financial recovery that he/she was enjoying prior to the harm being inflicted. The recent recognition of cryptocurrencies and similar digital assets as property in the legal system of Singapore, the UK, and India means that courts may apply the ordinary laws of damages and compensation.
Damages form the bulk of contract law’s remedies, which includes compensatory damages, Restitutionary damages and liquidated damage.
INJUNCTIONS
Where compensatory damages prove inadequate and insufficient, equitable remedies in the form of injunctions serves as a means to avert damage from occurring. When it comes to specific performance of self-executing contract, courts have often avoided it — by prohibiting the parties from performing their actions by issuing injunctions mainly against holders of keys of the assets and mediators rather than against the code itself.
Case Study — CLM v CLN (2022): the High Court of Singapore has granted a proprietary injunction and worldwide injunction for freezing of the fraudulently obtained crypto-assets; since the defendant was not in reach, the court treated crypto as property and prevented its use, providing an explicit proof of equity remedies applicability to de-centralised assets through a person rather than chain.[6]
CHAPTER 3: THE INDIAN POSITION — REGULATION AND RHUTIKUMARI V ZANMAI LABS
India serves as an invaluable case to test our theory because there is no clear and established legislative framework that could help explain why courts in Singapore and England have been able to formulate remedies. In addition, if there is an Indian court that reaches our conclusions in the absence of any such framework, then it seems that the observed pattern is not due to specific circumstances of the judicial system of a given country.
REGULATORY BACKGROUND
India does not have any laws concerning digital assets or smart contracts. The Finance Act of 2022 created Section 115BBH of the Income Tax Act, 1961, which imposes tax on the income earned through the transfer of digital assets.[7] While this amendment confirms that digital assets can be owned and transferred, it does not describe the legal nature of such assets further. Bitcoin and other crypto exchanges are required to register with the Financial Intelligence Unit under the Prevention of Money Laundering Act of 2002,[8] but this still does not answer the questions related to the ownership of assets held in crypto by individuals.
Meanwhile, the Reserve Bank of India is clearly against digital forms of money and issued an order in 2018 forbidding banks from dealing with crypto businesses, following which the Supreme Court overruled this directive in the case of Internet and Mobile Association of India v. Reserve Bank of India, making it clear that the RBI could not show any harm caused to the entities it regulated in real life.[9] Although the Reserve Bank of India continues to advocate its prohibition policy before Parliament, no clarity has been reached. .In other words, Indian courts addressing a virtual-asset dispute do so against a backdrop of taxation without characterisation, and regulatory caution without a rulebook.
RHUTIKUMARI V ZANMAI LABS PVT LTD: PROPERTY, TRUST, AND PERSON-DIRECTED RELIEF
The applicant purchased XRP tokens on the WazirX exchange, which is owned by Zanmai Labs Pvt Ltd, whose Singapore-based parent company, Zettai Pte Ltd holds the digital wallets’ custody. In July 2024, there was a cyberattack causing a different pool of Ethereum-based tokens to be compromised, making WazirX freeze the accounts of its users, and consequently propose a Singapore-approved restructuring of losses through Zettai. This restructuring would have burdened every user, including the applicant whose XRP tokens were not affected by the cyberattack. The applicant applied to the court for emergency relief against the provisions of the user agreement where the arbitration was in favour of a foreign country. [10]
After deliberations, the Madras High Court stated that it has the jurisdiction to provide emergency relief even though the arbitration clause mentioned a foreign country due to the part of the cause of action happening in India: i.e. the proceedings are being done in Chennai, through banks in India and through an Indian-based custodian. Secondly and importantly to the core of the paper, the court clarified that cryptocurrency is property in the Indian scenario that can be held in trust and an intermediary holds a fiduciary role rather than a custodial one.
Thirdly, since the applicant did not possess any XRP shares in connection with the hacked tokens, the court refused to allow the “socialization” of the applicant’s assets, and instead provided her with some temporary protection as long as she made a bank guarantee amounting to the value of her investment. Each part of the argument goes along a pattern that can already be identified in B2C2 and CLM v CLN[11] as the court did not make any efforts to reach a blockchain or undo any transaction that has been registered in this system. The only individual to whom the decision was addressed was the Indian custodian – Zanmai Labs, whose actions could be managed by the court. The court characterized the assets as being capable of property which is the same thing that was done by Singapore courts. What is important is that the Madras High Court made such a conclusion without any Indian legislation that would define virtual digital goods as property.
SYNTHESIS
In the matter of Rhutikumari, it must be recognised that this is a matter of a centralised exchange, and not of a comprehensive decentralised smart contract — here, the duty of care is owed not by the smart contract but by the custodian in charge of the assets of the user.[12] Notwithstanding this fact, the legal position and approach taken in this case is similar to that encountered in the flow of cases from B2C2 through CLM v CLN: when dealing with a non-amendable or foreign-controlled digital system, courts do not try to change the system, but determine the person responsible for the system and establish the nature of the asset in order to allow for the protection of that person from liability. Thus, in this case, the Indian court was able to make such a dedication decisions without having a specific law in place, but if the condition can be satisfied it proves that this principle and approach can also be applied to a true smart contract dispute in India.
CHAPTER 4: ENFORCEMENT REALITIES AND JUDICIAL INNOVATION
Establishing liability is only half the problem. Blockchain’s decentralised and immutable design makes enforcement of a remedy, once granted, a distinct and often harder challenge. A defective transaction whether caused by an oracle failure or a coding error cannot be reversed after the fact, because there is no central authority empowered to rewrite the ledger. A judgment that assumes such a reversal is possible is not enforceable; it is aspirational.
The practical gap between a defaulting party’s wallet and a plaintiff’s bank account is often wide. A defendant who moves funds through a hardware wallet, or spreads them across newly created addresses, can make tracing extremely difficult without the cooperation of a centralised intermediary. This is why enforcement in practice depends so heavily on centralised chokepoints exchanges, custodians, and payment intermediaries through which crypto-assets eventually pass on their way in or out of the fiat economy. Courts have adapted by directing relief at that chokepoint rather than at the asset’s origin.
Case Study — The DAO Hack (2016). An attacker exploited a vulnerability in The DAO’s code to drain a large quantity of ether. The withdrawal was lawful under the letter of the code but plainly contrary to what the community had intended. Rather than litigate the matter, the Ethereum community resolved it through a hard fork that rewrote the transaction history and restored the stolen funds.[13] The episode is instructive for what it reveals about the limits of judicial remedy: no court order could have achieved what the fork achieved, because no court has the power to rewrite a public ledger. Where a community is unwilling or unable to intervene at the protocol level — as will ordinarily be the case for a smart contract with no comparable governance structure — that avenue is simply unavailable, and the burden falls back onto conventional, person-directed remedies.[14]
The tracing problem has pushed English courts toward freezing orders directed at ‘Persons Unknown’ — orders that restrain the anonymous holder of a specific wallet without first identifying them by name.[15] Such orders are only available at all because courts have accepted that cryptocurrency is property capable of being frozen; had that characterisation gone the other way, the entire mechanism would be unavailable. This is worth underscoring: the property classification discussed in Chapters 2 and 3 is not merely a doctrinal label. It is the operative precondition for every enforcement tool that follows from it.
The tracing problem has prompted courts to issue freezing orders against ‘Unknown Parties’ maintaining anonymity of users of Bitcoins wallets. Courts can only have such power to freeze the accounts in question when the status of cryptocurrencies is viewed as being equivalent to property.[16]
Decentralized Autonomous Organizations may present additional complications in this respect due to the fact that their situations involve unsettled jurisdictional questions with regards to cases in which there is no identifiable leadership available. Courts may resort to the principle of unconscionability in order to protect one party if it has suffered from a result produced by automatic decision-making process, meaning that fairness automatically cannot be relied upon.[17] Smart contracts can help avoiding some of the issues in the area of legality of cryptocurrencies, since they can be incorporated into systems designed to prevent illegal automated decisions.
CHAPTER 5: PATHWAYS FORWARD
CAN TRADITIONAL REMEDIES WORK?
Traditional solutions may be effective, but only when courts avoid directing these solutions at the code. Determining liability and breach is accomplished using ordinary principles of contract law, no matter whether the fault is in the code or in decisions made by human beings. Similarly, if a digital asset has a defined value that qualifies as property, damages would be awarded regardless of the degree of imperfection of the transaction, as in the case of B2C2.[18]
SUGGESTIONS FOR REFORM
Dispute Resolution Mechanisms. Smart contracts could be designed with multi-signature wallets or built-in override functions, allowing an arbitral or judicial award to be executed without requiring any retrospective change to the ledger itself. This converts enforcement from an after-the-fact judicial improvisation into a feature the contract was designed to accommodate from the outset.
Intermediary Obligations. Exchanges and custodians could be placed under a defined statutory duty to comply with freeze and disclosure orders, building directly on the fiduciary duty Rhutikumari located at common law. Codifying that duty would remove the uncertainty of relying on judicial improvisation case by case, and would give intermediaries clear notice of what compliance requires.
Cross-Border Enforcement. Because crypto-assets move across borders more easily than judgments do, a treaty-based mechanism for recognising and enforcing cross-border orders in crypto disputes would close a gap that Rhutikumari itself only partly bridged through the fortunate presence of an Indian-registered intermediary. Absent such cooperation, claimants will continue to depend on the accident of finding a domestic chokepoint to sue.
Volatility Management. Courts could be given express authority to convert frozen cryptocurrency into a stable asset pending final resolution, so that a claimant’s ultimate recovery is not eroded — or inflated — by market movement that has nothing to do with the merits of the dispute.
Ex Ante Review for Unconscionability. Regulatory or judicial review of smart contract terms before deployment, particularly in consumer-facing applications, would allow the unconscionability principle discussed in Chapter 4 to operate preventively rather than only as a remedy after harm has already crystallised.[19]
CONCLUSION
This paper’s main assertion may seem narrow, but it has implications beyond that. When there is a breach in a smart contract, damages and injunctions are still in place and just are being used incorrectly when they are aimed at the code. If they were used towards people responsible for the keys, custodianship, or intermediaries, the above methods would fulfill their traditional purposes.
The most important consequence of the case Rhutikumari v Zanmai Labs Pvt Ltd is that it shows that this situation is not a matter of legal convenience available only to financially sound common law states with regulations governing cryptocurrencies in place, as this Indian court decided the case by applying the rules of property law.[20]
The limitation of the case must be disclosed as well. Rhutikumari denotes a case of a centralized exchange, where a user’s assets were held. As regards a venture connected to a smart contract that does not have a clear custodian, it can be questioned whether the Indian courts would be able to deal with such a case because there is no obvious custodial mediator in place.
REFERENCES AND SOURCE MATERIALS
LEGISLATIVE TEXTS
- The Indian Contract Act 1872.
- The Specific Relief Act 1963.
- The Income-tax Act 1961, s 115BBH (as inserted by the Finance Act 2022).
- The Prevention of Money Laundering Act 2002.
- The Arbitration and Conciliation Act 1996, s 9.
CASE LAWS
B2C2 Ltd v Quoine Pte Ltd [2019] SGHC(I) 3; [2020] SGCA(I) 2 (Singapore CA).
CLM v CLN [2022] SGHC 46 (Singapore HC).
Rhutikumari v Zanmai Labs Pvt Ltd, OA No 194 of 2025, 2025:MHC:2437 (Madras HC, 25 October 2025).
AA v Persons Unknown [2020] EWHC 1088 (Comm).
Internet and Mobile Association of India v Reserve Bank of India (2020) 10 SCC 274.
Articles and Scholarly Sources
- Joshua Sklaroff, ‘Smart Contracts and the Cost of Inflexibility’ (Penn Carey Law: Legal Scholarship Repository) <https://scholarship.law.upenn.edu/faculty_scholarship/2032> accessed 29 October 2025.
- Angela Walch, ‘The DAO Hack and the Law’ (2017) 1(2) Journal of Law and Innovation
- Alberto R Salazar V, ‘Unconscionability, Smart Contracts, and Blockchain Technology: Are Consumers Really Protected Against Power Abuses in the Digital Economy?’ (2021) 9 International Journal on Consumer Law and Practice 74.
[1] Rhutikumari v Zanmai Labs Pvt Ltd, OA No 194 of 2025, 2025:MHC:2437 (Madras HC, 25 October 2025).
[2] Joshua Sklaroff, ‘Smart Contracts and the Cost of Inflexibility’ (Penn Carey Law: Legal Scholarship Repository) <https://scholarship.law.upenn.edu/faculty_scholarship/2032> accessed 29 October 2025.
[3] B2C2 Ltd v Quoine Pte Ltd [2019] SGHC(I) 3; [2020] SGCA(I) 2 (Singapore CA); CLM v CLN [2022] SGHC 46 (Singapore HC).
[4] Internet and Mobile Association of India v Reserve Bank of India (2020) 10 SCC 274.
[5] B2C2 Ltd v Quoine Pte Ltd (n 4).
[6] CLM v CLN (n 4).
[7] The Income-tax Act 1961, s 115BBH (as inserted by the Finance Act 2022).
[8] The Prevention of Money Laundering Act 2002.
[9] Internet and Mobile Association of India v Reserve Bank of India (n 5).
[10] Rhutikumari (n 2).
[11] B2C2 and CLM v CLN (n 4).
[12] Rhutikumari (n 2).
[13]Angela Walch, ‘The DAO Hack and the Law’ (2017) 1(2) Journal of Law and Innovation 1.
[14] Angela Walch, ‘The DAO Hack and the Law’ (2017) 1(2) Journal of Law and Innovation 1.
[15]AA v Persons Unknown [2020] EWHC 1088 (Comm).
[16] AA v Persons Unknown [2020] EWHC 1088 (Comm).
[17] Alberto R Salazar V, ‘Unconscionability, Smart Contracts, and Blockchain Technology: Are Consumers Really Protected Against Power Abuses in the Digital Economy?’ (2021) 9 International Journal on Consumer Law and Practice 74.
[18] B2C2 (n 4).
[19]Salazar (n 17).
[20] Rhutikumari (n 2).