INTRODUCTION
Instead of stealing a person’s identity, synthetic identity fraud creates a new one. A fraudster takes one genuine credential, usually a real Permanent Account Number (PAN) or the Aadhaar number, and combines it with fake names, addresses and income proofs to create a credit-worthy identity that is linked to no actual person. This distinguishes civil recovery from its root concept: The Specific Relief Act, 1963 (‘SRA’) provides for declaratory, injunctive, and possessory relief only against a defendant who is known[1], can be served and can be compelled to comply. The synthetic borrower design renders that premise inapplicable right from the start. This article makes the case that the 2025 KYC Directions, while strengthening document- and video-based verification protocols, keep this structural lacuna ajar, and that the SRA’s declaratory and injunctive instrument designed with flesh-and-bones defendants in mind is therefore ill-suited to bringing forth an executable order vis-à-vis a synthetic borrower.
THE KYC FRAMEWORK AND WHERE SYNTHETIC IDENTITIES SLIP THROUGH
The regulatory framework has recently changed. On 28 November 2025, the Reserve Bank of India (RBI) revoked the existing Master Direction Know Your Customer (KYC) Direction, 2016, and introduced a new set of entity-specific 2025 KYC Directions comprising, among others, the Reserve Bank of India (Commercial Banks – Know Your Customer) Directions 2025, thereby streamlining RBI norms in subject- and entity-specific Master Directions.
The core structure of Customer Due Diligence remains unchanged post consolidation: banks are expected to carry out independent verification of identity and address based on Officially Valid Documents, carry out risk assessment and avail of the Central KYC Registry and the video-based Customer Identification Process for onboarding.[2]
Synthetic identity fraud is targeted specifically for this architecture’s vulnerability: document-level verification. When a submitted PAN or Aadhaar number is valid, e-KYC or Video-KYC checks against that document will come out clean even if the name, address, or job associated with it is fake or belongs to someone else. The scam usually develops gradually:
- A synthetic identity is brought on board with real identifiers such as a PAN or Aadhaar number coupled with fake personal information.
- The credit line or account is used sparingly initially to create a believable transaction or repayment history.
- Credit limits are increased, or bigger loans are granted based on that history; and
- The credit line is used up and left, a process known as ‘bust-out’ fraud and the bank is left holding a debt to a borrower who, as constructed, is a non-existent individual.
When the fraud comes to light, the bank has a KYC file which is essentially compliant on paper, but which relates to no real, identifiable human being. The electronic trail may confirm that the document was authenticated but not identify the borrower. That gap is exactly where civil recovery under the SRA is impossible as a practical matter: a fictitious identity prevents the enforcement of a decree under Section 34 (declarations) and Sections 37–38 (injunctions), as no remedy may be enforced against a non-existent defendant.
Closing it may need to involve a shift from document verification to behavioural authentication, device fingerprinting, continuous identity verification, and AI-powered transaction-pattern analytics, technologies that can sniff out bust-out build-up better than a one-time onboarding check.[3]
WHY THE SPECIFIC RELIEF ACT STRUGGLES WITH AN UNREAL DEFENDANT?
The SRA provides India’s main civil remedies short of a plain money decree: declaration, injunction and possession, and each revolves around a defendant who can be ascertained, served and coerced.
A declaratory suit under Section 34 requires the plaintiff to also pray for any further consequential relief available; otherwise, the relief of bare declaration of invalidity shall be refused under the proviso to that section.[4]
A bank that is trying to prove that its loan account was obtained by using a fictitious identity will also invariably require the injunction against dealing in the immovable property, or dealing in the traceable proceeds. If the named borrower cannot be found or served, that consequential relief cannot practically be demanded from a real defendant, rendering the suit susceptible to being treated as a naked declaration, and an incomplete one at that. This is not a mere pleading nicety: the Supreme Court has held that a suit confined to bare declaration, where consequential relief was available and not sought, is barred by the proviso to Section 34.[5]
Injunctive relief fares no better. A permanent injunction under Section 38 can be granted against breach of duty owed to the plaintiff, but Section 41 enumerates several cases in which no injunction shall be issued, such as, amongst others, where there is another established course of action that promises to be as effective a recourse and where the obligation forming the substrate thereof is one such as for a simple debt of money for which it would not grant an order for specific performance at the outset.[6]
A loan is, in essence, a monetary claim: the promise to pay money is not specifically enforceable, but a money decree is granted for it. So, the SRA’s injunctive machinery was never really intended to serve as the instrument to recoup a synthetic-identity loan; its practical application is more limited to freezing traceable proceeds or bank accounts as the underlying debt is pursued elsewhere, usually before the Debts Recovery Tribunal or under the SARFAESI Act for secured facilities. The bar in Section 41(h) further endorses this: In the presence of the equally efficacious alternate remedies available under DRT and SARFAESI, a civil court may refuse to entertain a suit for injunction even though there is a concurrent suit pending.[7]
CAN RESTITUTION FILL THE GAP?
At first blush, a claim in unjust enrichment may seem to evade the SRA’s defendant-centred architecture, since restitution depends on tracing a benefit rather than privity with a borrower; a bank that pays out funds on a fake profile can bring a claim against the real recipient.
Restitution ‘inherits the SRA’s infirmities rather than inspires to correct them’: there still needs to be a defendant who can be decreed against, and banks, when funds go through mule accounts, can often identify an unjust enrichment without identifying an enriched party. The problem is not a missing remedy but a missing beneficiary.[8]
THE ‘UNKNOWN DEFENDANT’ WORKAROUND, AND ITS LIMIT
Indian courts have always allowed suits against anonymous perpetrators in IPR litigation; the relief is commonly called John Doe or ‘Ashok Kumar’ orders ex parte injunctions are passed against unknown defendants under Order XXXIX Rules 1 and 2 read with Section 151 on a balance of convenience, existence of prima facie case, and consideration of irreparable harm to the plaintiff in the first instance.
That tool has started to morph in fraud litigation: in L’Oréal v Ashok Kumar & Ors, the Delhi High Court granted relief to anonymous defendants who had pretended to be the plaintiff’s employees and forged documents defrauding a business associate of goods amounting to nearly one crore rupees, showing that courts can apply the unknown-defendant approach.[9] To fraud and impersonation, beyond counterfeiting.[10]
For banks, the analogy is imperfect but useful. An Ashok Kumar-style interim injunction can freeze a mule account or enjoin further dealing with traceable proceeds even before the person behind a synthetic identity is unmasked, gaining time for forensic tracing. But that does not solve the underlying issue in SRA. Such an order is interlocutory by its nature: it is based on the assumption that the unknown defendant will be identified and substituted as per Order I Rule 10 of the Code of Civil Procedure, 1908 and thereafter a final and binding decree will be passed against a real person. In the absence of such substitution, the suit either abates or remains perpetually interlocutory – a civil court cannot pass an executable final decree against a non-existent defendant. When a synthetic identity is deliberately created, with no real person ever to be found down the KYC trail, as opposed to a real person hiding behind an alias, substitution may never take place, stranding the bank with an interim freeze and no path to a final, executable decree under the SRA.[11]
CONCLUSION
Synthetic identity fraud reveals a structural dissonance between the manner in which KYC compliance is verified and the question that the Act was drafted to address under the Specific Relief Act. The 2025 KYC Directions strengthen document-level and video-based verification methods, but they do not close the loophole that synthetic identity fraud is designed to exploit: a real identifier wrapped in a fake identity. When this fraud is detected, the SRA’s declaratory and injunctive remedies, and restitution with themselves, assume a defendant who can ultimately be named, served, and bound; courts have crafted around that presupposition in intellectual property and, more recently, fraud litigation through unknown defendants’ injunctions, but crafting is no remedy. For banks, the more reliable recovery routes remain the specialised statutory ones: DRT proceedings and SARFAESI enforcement, with the SRA-based injunctions acting as little more than a holding measure to freeze traceable proceeds while the fraud is unwound off-stage. Until the KYC framework is rebuilt on behavioural and continuous verification, rather than one-time document checks, the SRA will be permanently crippled from issuing a code of conduct to a defendant who simply does not exist.
Author(s) Name: Gagan P (Presidency University, Bangalore)
References:
[1] Specific Relief Act 1963
[2] Reserve Bank of India (Commercial Banks – Know Your Customer) Directions 2025
[3] Specific Relief Act 1963, ss 34, 37–38
[4] Ibid s 34
[5] Union of India v Ibrahim Uddin and Anr (2012) 8 SCC 148
[6] Specific Relief Act 1963, ss 38, 41(e), 41(h)
[7] Recovery of Debts and Bankruptcy Act 1993; Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002
[8] Indian Contract Act 1872, ss 65, 72
[9] Taj Television Ltd & Anr v Rajan Mandal & Ors (2003) FSR 22
[10] L’Oréal SA v Ashok Kumar & Ors (2025) DHC 2155
[11] Code of Civil Procedure 1908, O I r 10