SRINAGAR: In a significant ruling on the use of Artificial Intelligence in the judicial system, the Supreme Court on Thursday set aside the judgments of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) after finding that they had relied on fake and AI-hallucinated judicial precedents.
Simultaneously, the court endorsed the adoption of AI as an aid to adjudication but asserted that judicial decision-making must remain under “total and absolute” human control.
A Bench of Justices Pamidighantam Sri Narasimha and Alok Aradhe delivered the judgment in Pooja Ramesh Singh v. Jammu and Kashmir Bank Ltd. & Anr., observing that the integrity of the judicial process cannot be compromised by the use of fabricated AI-generated material masquerading as legal precedent.
“This is yet again a case where the Tribunal relied on non-existent, fake and hallucinated material, generated through Artificial Intelligence (AI), as if it were a precedent in support of its judgment,” the Bench said.
The court declared that while AI has enormous potential to assist courts, “what is significant for our decision-making is our resolve to adopt AI technology in aid of adjudication, while at the same time asserting and declaring total and absolute control over adjudication, with a human in the loop at every stage.”
The Bench laid down a strict standard against the use of unverified AI-generated legal material, observing that courts must adopt a “zero-tolerance mode” towards fake precedents.
“It is necessary for Courts to adopt a zero-tolerance mode for producing, citing or using AI-generated precedents without verification. It is a misconduct on the part of an advocate to cite such judgments without verification. Equally, it is a serious lapse if a judge relies on such a fake or hallucinated AI-generated material as precedents,” the judgment said.
Warning about the dangers posed by AI hallucinations, the Bench drew an unusual comparison, stating that the production and use of fabricated legal precedents “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 further held that any judgment founded even partly on fake AI-generated precedents cannot be sustained.
“We have no hesitation in declaring that such a decision is no decision in the eyes of the law… Such decisions are to be set aside even if an iota of fake or hallucinated material enters the decision-making process, as it would violate the sanctity of adjudication.”
Recognising that regulation alone would not solve the problem, the Bench stressed the need for cooperation between judges and lawyers.
“The real success is… to be found in the power of the will of the Bar as well as the Bench, to harness this science and apply it with care and caution,” it observed.
The court also directed the Bar Council of India to constitute a committee to frame guidelines and recommend disciplinary measures against advocates who submit fake or AI-hallucinated legal authorities before courts.
Case Details
The appeal arose from insolvency proceedings initiated by Jammu and Kashmir Bank Limited against Essel Infraprojects Ltd., which had furnished a corporate guarantee for loans extended to Pan India Utilities Distribution Company Ltd. After the borrower defaulted, the bank initiated proceedings under Section 7 of the Insolvency and Bankruptcy Code before the NCLT, Mumbai. The tribunal admitted the insolvency application on August 28, 2024, and the NCLAT upheld that decision on September 11, 2025.
Before the Supreme Court, senior advocate Madhavi Divan, appearing for the appellant, pointed out that several judgments cited by the NCLT were either entirely non-existent or contained AI-generated paragraphs wrongly attributed to genuine Supreme Court decisions. An independent examination by the Bench confirmed that several authorities relied upon by the tribunal were fabricated, while others contained non-existent passages despite carrying genuine citations.
The court also noted that Jammu and Kashmir Bank had filed an affidavit stating that its counsel had never cited those authorities and that the tribunal had relied upon them through its own research. The Bench observed that the fake precedents escaped scrutiny even before the appellate tribunal.
Holding that the judicial process had been “tainted” by reliance on fabricated material, the Supreme Court set aside both the NCLT and NCLAT orders, restored the original insolvency proceedings before the NCLT, and directed the tribunal to dispose of the matter expeditiously, preferably within two weeks, while maintaining status quo in the meantime.
