The Blues are not allowed to register new players for the next two windows under the FIFA-imposed ban, but may have a loophole with the Croatian, who was already registered last season.
The 25-year-old made 51 first-team appearances for the West London club since last summer’s loan deal, but there was no option to buy included in the deal.
It is now claimed that the central midfielder will definitely exit Los Blancos again this summer with the Blues hopeful on a deal, despite the exit of boss Maurizio Sarri - who admired the player.
Madrid signed the former Dinamo Zagreb midfielder from Italian giants Inter in the summer of 2015 for €30m and are said to want significantly more than that sum in the event of a permanent departure.
Indeed, the Milanese giants are said to be waiting and Madrid may value him in the region of €55m.