The Supreme Court of India has delivered a landmark ruling on the unregulated use of artificial intelligence (AI) in judicial decision-making, declaring that judgments relying on fake, AI-hallucinated precedents violate the sanctity of adjudication. A Division Bench comprising Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe set aside the orders of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) after finding that several judicial precedents cited by the NCLT were non-existent and generated by AI. To maintain the integrity of the judicial process, the Bench restored the underlying insolvency application to the NCLT, directing it to decide the matter on its own merits within two weeks, while also issuing directives to the Bar Council of India to address the submission of fabricated materials by advocates.
Case Background
The appellant, Pooja Ramesh Singh, is a suspended director of Essel Infraprojects Ltd (EIL), which acted as the corporate debtor and corporate guarantor for the original borrower, Pan India Utilities Distribution Company Ltd (PIUDCL). PIUDCL had availed of certain loan facilities from Jammu and Kashmir Bank Limited (Respondent No. 1) and subsequently failed to maintain its repayment schedules, leading to its loan accounts being classified as non-performing assets.
Following continuous defaults, Respondent No. 1 filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, before the NCLT Mumbai, seeking the initiation of the corporate insolvency resolution process against EIL. On August 28, 2024, the NCLT admitted the application, appointed an Interim Resolution Professional, and declared a moratorium.
Aggrieved by the admission order, the appellant appealed to the NCLAT, contending that EIL’s liabilities had been transferred to another company due to a scheme of demerger and subsequent amalgamation. The appellant further argued that a renewed sanction letter dated November 18, 2017, did not mention the guarantee, implying it had been relinquished. On September 11, 2025, the NCLAT dismissed the appeal, confirming the NCLT’s findings. The NCLAT noted that internal adjustments within the Essel group had no effect on the corporate guarantor’s liability because Clause 8 of the guarantee deed categorically stated that the guarantee would not be determined in the event of absorption or amalgamation.
Arguments of the Parties
Before the Supreme Court, Ms. Madhavi Divan, senior counsel appearing for the appellant, pointed out that the citations and judgments relied upon by the NCLT to arrive at its findings—which were referenced in paragraph 12 of the NCLAT’s opinion—were fake, non-existent, and likely generated through AI. She highlighted that even where the case names and citations appeared accurate, the excerpted paragraphs could not be traced to any law reports. Ms. Divan also advanced brief arguments on the merits of the case.
The respondents countered these submissions on merits. However, Respondent No. 1 filed an affidavit clarifying that the disputed judgments were never cited by its counsel at the bar. Instead, the so-called precedents relied upon by the NCLT were obtained through the tribunal’s own independent research. The NCLAT, acting as the first statutory appellate court, subsequently failed to detect that these judgments were fake and non-existent.
The Court’s Analysis of AI “Hallucinations”
Upon conducting an independent examination of the six judgments cited by the NCLT and NCLAT, the Supreme Court confirmed that the material was entirely fabricated or distorted:
- State Bank of India v. M/s Shree Ram Urban Infrastructure Ltd. (2020 SCC OnLine SC 341): Wrong citation of an existing reported judgment (which is actually M. Subramaniam v. S. Janaki) and a non-existent paragraph.
- Everest Kento Cylinders Ltd. v. Union of India ((2015) 2 SCC 1): Correct citation, but the referenced paragraph is non-existent.
- ICICI Bank Ltd. v. Urban Infrastructure Real Estate Ltd. ((2019) 16 SCC 528): Completely non-existent citation.
- V.S. Dempo & Co. Ltd. v. Reliance Communications Ltd. ((2021) 10 SCC 176): Completely non-existent citation.
- Canara Bank v. N.G. Subbaraya Setty & Anr. ((2018) 16 SCC 228): Correct citation, but the referenced paragraph is non-existent.
- Sarbjit Singh v. Union Bank of India ((2022) 7 SCC 464): Completely non-existent citation.
Addressing this development, the Supreme Court observed: “This is yet again a case where the Tribunal relied on non-existent, fake and hallucinated material, generated through Artificial Intelligence (Al), as if it were a precedent in support of its judgment.“
The Court acknowledged that modern technology has been seamlessly integrated into court systems, noting international developments such as the United Kingdom’s Solicitors Regulation Authority (SRA) approving Garfield Law Limited (GLA)—the first purely AI-driven law firm—in 2025. However, the Court warned against the risks of delegating human thinking to unregulated AI tools: “Dependency on technology has never been a problem for the dispensation of justice, as our courts have seamlessly absorbed technologies and made them an integral part of court systems.” “The story of Al, as it is unfolding, is, however, different, in fact, transformative, as it is not just an aid to assist us in our work, but is an alternative to our own thinking, reasoning and even decision making.“
The Bench compared the threat of unverified AI-generated content in the legal system to an industrial disaster: “For us, i.e., for those in the province of adjudication and determination of disputes, this by-product of Al, i.e., the production of fake, non-existent, and hallucinated material and its utilisation as precedents in law, is like the release of methyl isocyanate in the province of law and justice: invisible, insidious, and catastrophic by the time anyone notices.“
The Court emphasized that decisions relying on such fabricated material cannot be sustained, declaring: “It is necessary for Courts to adopt a zero-tolerance mode for producing, citing or using Al-generated precedents without verification.” “We have no hesitation in declaring that such a decision is no decision in the eyes of the law, irrespective of whether such material had a direct or indirect bearing on the decision-making.” “A decision of a Court or an adjudicating authority based on material which is fake and hallucinated is no decision at all, and it amounts to subversion of the rule of law.“
The Court clarified that its ruling is directed solely at the presentation or reliance on fake, hallucinated material as court precedents, and has no bearing on the rightful use of AI.
Decision of the Court
Because the judicial process and the challenged judgments were tainted by non-existent precedents, the Supreme Court set aside both the NCLT order dated August 28, 2024, and the NCLAT judgment dated September 11, 2025.
The Section 7 application (RCP (IB) 6/MB/2023) has been restored to its original number. The Supreme Court directed the NCLT to take up and dispose of the application expeditiously, preferably within two weeks, on its own merits, without being influenced by any observations in this judgment. Pending the final disposal of the application, the parties have been directed to maintain status quo.
To address professional accountability, the Court directed the Bar Council of India to constitute a committee to deliberate on the issue of advocates submitting fake and hallucinated AI-generated material as legal precedents. The Bar Council is expected to prescribe guiding principles to prevent such occurrences and detail the disciplinary actions that will follow any future violations.
Case Details
Case Title: Pooja Ramesh Singh Versus Jammu and Kashmir Bank Ltd. & Anr.
Case No.: Civil Appeal No. 11950 of 2025
Bench: Justice Pamidighantam Sri Narasimha, Justice Alok Aradhe
Date: July 02, 2026
