This work proposes a physical memristor (TaOx) based new 4D chaotic system with 3D multi-scroll, no equilibrium point, spiking behaviour, coexistence bursting oscillation and multistability. Using this physical memristor-based chaotic system, a novel and efficient colour image encryption algorithm has been developed using a unique box scrambling method and bit-wise XOR operations. Many interesting and new dynamics of a material-based memristive chaotic system are reported here, like 3D multi-scroll chaotic attractors, bursting characteristics, multistability, a neuronal system like spiking behaviours etc using Lyapunov spectrum and bifurcation plots. It is observed that the number of scrolls is changed with the total simulation time. This novel memristive chaotic system has limit cycles with controllable spikes and bursting oscillation. In addition, the system shows chaotic bursting oscillation under a different set of parameters and initial conditions. The coexistence of the bursting phenomena is studied here. The bursting and spiking characteristic is important for material-based memristors in neuromorphic applications. 3D Chaotic multi-scroll and multistability properties make the image encryption method more efficient and secure. Such characteristics are rare in physical memristor-based chaotic systems and using this, the image encryption algorithm is also rare in recent findings. Therefore, a new secure image encryption algorithm for colour images is proposed here, based on the unique box scrambling method, bitwise XOR operation and pseudo-random number generation using the proposed memristive chaotic system. Various tests like NPCR, UACI, histogram analysis, correlation study, information entropy analysis, robustness against external noise, etc have been performed to check the algorithm’s robustness and efficiency and test the capability to resist statistical and differential attacks.