SK Law House Legal Blog

Supreme Court Sets Aside NCLT and NCLAT Orders for Reliance on AI-Generated Fake Citations

In Pooja Ramesh Singh v. Jammu and Kashmir Bank Ltd. & Anr., 2026 INSC 668, decided on 2 July 2026, the Supreme Court dealt with a serious issue affecting the integrity of judicial decision-making. The Court found that the National Company Law Tribunal and the National Company Law Appellate Tribunal had relied on fake, non-existent and hallucinated case material presented as precedent. The Supreme Court held that a decision tainted by such material cannot stand in law.

Background of the Case

The appellant was a suspended director of Essel Infraprojects Ltd., the corporate debtor and corporate guarantor for loan facilities granted by Jammu and Kashmir Bank Ltd. to Pan India Utilities Distribution Company Ltd. After default, proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 were initiated before the NCLT, Mumbai. The NCLT admitted the application on 28 August 2024, and the NCLAT dismissed the appeal on 11 September 2025.

Before the Supreme Court, it was pointed out that the authorities below had relied on citations and extracted paragraphs that were either wholly non-existent or wrongly attributed to real judgments. This raised a larger question about the use of AI-generated material in adjudication.

What the Supreme Court Found

The Supreme Court independently examined the citations relied on below and found that the problem was real and serious. Of the six citations relied on in the NCLT judgment, some were entirely non-existent, while others carried genuine citations but were attributed with paragraphs that did not exist in the actual judgments. One citation was also found to belong to a different judgment, yet it too had been attributed with non-existent text.

The Court noted that such fake material had not been detected at the NCLT stage and had also escaped scrutiny before the NCLAT. This, according to the Court, directly affected the sanctity of the adjudicatory process.

AI Can Assist, But Cannot Replace Judicial Verification

The Supreme Court made it clear that it is not opposed to the legitimate use of Artificial Intelligence. The Court recognised that AI can aid legal and judicial work and may improve efficiency when used carefully. However, it stressed that adjudication must remain under total human control at every stage.

The Court explained that AI is different from earlier technologies because it can generate apparently convincing but false material. For that reason, judges and lawyers must use extreme caution. The Court emphasised that truth, accuracy and independent verification cannot be outsourced to a machine.

Zero Tolerance for Hallucinated Precedent

The Supreme Court adopted a zero-tolerance position on the use of fake or hallucinated precedents. It held that if unreal material enters the judicial decision-making process as precedent, the resulting decision is no decision in the eyes of law. Such a judgment becomes unsustainable because it undermines the rule of law itself.

The Court also observed that the problem is not limited to advocates. It is equally serious if a Court or Tribunal relies on such unverified material. The responsibility to verify precedent lies at every level of the adjudicatory process.

Directions to the Bar Council of India

The Supreme Court held that a mere warning is not enough without accountability. It therefore directed the Bar Council of India to constitute a committee to examine the issue of advocates submitting fake or hallucinated material as though it were genuine precedent. The committee has been asked to frame guiding principles and consider the disciplinary consequences that should follow violations.

Final Decision

The Supreme Court set aside the judgments and orders of both the NCLT and the NCLAT. The Section 7 insolvency application was restored to its original number and remitted to the NCLT for fresh disposal on its own merits in accordance with law.

The judgment is an important reminder that while technology may assist legal work, judicial outcomes must rest only on verified facts, authentic case law and disciplined human scrutiny.

Conclusion

This ruling reinforces a basic but vital principle: courts cannot decide cases on imaginary precedents. AI may be a useful tool, but unverified AI output cannot be treated as legal authority. Where fake citations enter the reasoning process, the decision itself is rendered unsafe and must be set aside.

For insolvency litigation, appellate strategy, precedent verification issues and court-order analysis, careful legal review remains essential.

SK Law House
Civil, Property, Registration and Consumer Law
Vandavasi | Tiruvannamalai District | Tamil Nadu