The Supreme Court on Thursday set aside an order of the National Company Law Tribunal (NCLT) in the insolvency case of Essel Infraprojects after finding that the tribunal had relied on non-existent, AI-generated judgments. The fake citations were made in the case of Pooja Ramesh Singh vs Jammu and Kashmir Bank Ltd.
Why did the Supreme Court set aside the NCLT order?
A Bench of Justices P S Narasimha and Alok Aradhe held that reliance on hallucinated legal material “strikes at the integrity of adjudication and its processes” and directed courts to adopt a “zero-tolerance” approach towards the production or use of AI-generated precedents without proper verification.
“Courts must adopt a zero-tolerance mode for producing, citing or using AI-generated precedents without verification,” the Bench said.
The Court held that citing fake AI-generated precedents amounts to “professional misconduct” by advocates. It also observed that it is a serious judicial lapse if a judge relies on such fabricated material while deciding a case.
“We have no hesitation in declaring that such a decision is no decision in the eyes of the law,” the Court said, adding that a judgment must be set aside even if “an iota” of fake or hallucinated material enters the decision-making process.
Accordingly, the apex court set aside both the NCLT order and the National Company Law Appellate Tribunal (NCLAT) judgment that had upheld it, directing the tribunals to reconsider the matter solely on the basis of verified facts and applicable law.
What did the Supreme Court say about AI in adjudication?
The Bench also raised concerns over the use of artificial intelligence (AI) in the judicial process. While AI can be used as an assistive tool, “human control over adjudication must remain total and absolute at every stage”, it said.
The Court acknowledged that professionals may increasingly rely on AI to manage growing workloads, but cautioned that unregulated use could erode independent reasoning and make legal professionals overly dependent on technology.
Unlike other technologies already integrated into courts, AI is capable of influencing thinking, reasoning and decision-making, the Bench observed, warning judges to exercise caution while using such tools.
The Supreme Court also directed the Bar Council of India to constitute a committee to examine the issue in detail.
What was the Essel Infraprojects insolvency case about?
The case arose from a plea filed by suspended director Pooja Ramesh Singh challenging the NCLT’s August 28, 2024, order admitting Essel Infraprojects into the corporate insolvency resolution process on an application filed by Jammu and Kashmir Bank over an alleged default of ₹87.43 crore. The NCLAT upheld the order on September 11, 2025.
While examining the appeal, the Supreme Court found that the NCLT had relied on non-existent, AI-generated precedents to support its reasoning and consequently set aside both tribunal orders for fresh consideration.
