Free Press Journal
Supreme Court Sets Aside NCLT, NCLAT Orders Over AI-Generated Fake Citations; Asks BCI To Frame Norms
New Delhi, July 2, 2026: In a significant ruling that underlines the risks of using artificial intelligence (AI) in the legal system, the Supreme Court on Thursday set aside orders passed by the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) after finding that both forums had relied on fake, AI-generated judicial precedents while deciding an insolvency dispute.The Court also directed the Bar Council of India (BCI) to constitute a committee to examine issues arising from the use of artificial intelligence in adjudication and frame guiding principles to prevent such incidents. The move signals the judiciary’s intent to embrace AI as a tool while ensuring that human oversight remains central to judicial decision-making.AI Can Assist Not DecideA Bench of Justice PS Narasimha and Justice Alok Aradhe said courts must adopt a “zero-tolerance” approach towards producing, citing or relying on AI-generated precedents without verification. It held that citing fake judgments without checking their authenticity amounts to professional misconduct by an advocate.“For us, that is, for those who are in the province of adjudication and determination of disputes, this by-product of AI, that is the production of fake, non-existing and hallucinated material and its utilization as precedence in law, is like the release of methyl isocyanide in the province of law and justice, invisibly insidious and catastrophic by the time anyone notices,” the Court said.“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 fake or hallucinated AI-generated material as precedents in support of the determination,” the Court said.The Bench further declared that any decision based on fake or hallucinated AI-generated material is “no decision in the eyes of the law” and must be set aside even if only “an iota” of such material enters the decision-making process.Human Oversight EssentialThe Court made it clear that while artificial intelligence can support adjudication, it cannot replace human reasoning. “More than the inevitable consequence of setting aside such judgment, what is significant for our decision-making is our resolve to adopt artificial intelligence technology in aid of adjudication while at the same time asserting and declaring total and absolute control over adjudications with a human in the loop at every stage,” it said.The Bench also asked the BCI to examine the issue with “utmost seriousness”, deliberate on it and prescribe guiding principles, including disciplinary action for violations. “We have therefore directed the Bar Council of India also to constitute a committee and examine these issues in detail,” it said.The appeal arose from insolvency proceedings initiated by Jammu and Kashmir Bank Ltd. under Section 7 of the Insolvency and Bankruptcy Code against Essel Infraprojects Ltd., which had executed a corporate guarantee for credit facilities extended to Pan India Utilities Distribution Company Ltd. The NCLT, Mumbai, admitted the insolvency application on Aug. 28, 2024, recording a default of Rs 87.43 crore. The NCLAT upheld the order on Sept. 11, 2025, Live Law and Bar & Bench reported.Fake Citations Prompt Fresh HearingBefore the Supreme Court, Senior Advocate Madhavi Divan, appearing for suspended director Pooja Ramesh Singh, argued that the tribunals had relied on six judicial decisions that either did not exist or did not support the legal propositions attributed to them. An affidavit before the Court confirmed that the cited authorities could not be traced in any recognised legal database.The Court also noted Jammu and Kashmir Bank’s affidavit stating that the fake judgments were not cited by its counsel and that the tribunal had relied on them through its own research.Calling AI-generated fake precedents a serious threat to the justice system, the Bench observed: “For those who are in the province of adjudication and determination of disputes, this by-product of AI, that is the production of fake, non-existing and hallucinated material and its utilisation as precedents in law, is like the release of methyl isocyanide in the province of law and justice.”Also Watch: Chief Justice Of India Warns Advocates-On-Record Against Outsourcing Legal Work To AI ToolsThe Supreme Court remanded the matter to the NCLT for fresh consideration on facts, uninfluenced by the fabricated citations, and directed the parties to maintain status quo until the matter is decided afresh. The ruling sends a clear message that while AI has a growing role in the legal system, the responsibility for ensuring the authenticity of legal material rests squarely with lawyers and judges.To get details on exclusive and budget-friendly property deals in Mumbai & surrounding regions, do visit: https://budgetproperties.in/
4 hours ago
