The Supreme Court sets aside National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) orders after finding they relied on non-existent, AI-generated judicial precedents in an insolvency dispute. In its ruling, a bench comprising Justices P.S. Narasimha and Alok Aradhe directs that decisions influenced even in part by fake AI citations cannot stand. The court characterizes the use of hallucinated or fabricated legal material as undermining the rule of law, and it describes reliance on such content as a serious lapse for judges and professional misconduct for advocates who cite unverified material.
The court reiterates that the issue is not the legitimate use of AI as a research aid, but the presentation of unverified or fabricated outputs as authentic legal authorities. It also orders the Bar Council of India (BCI) to constitute a committee and frame guiding principles and norms to prevent recurrence, including steps for disciplinary action. The case is remanded for fresh consideration before the NCLT on the merits, uninfluenced by the disputed citations, and the parties are told to maintain status quo until the case is decided again. Multiple reports cite the Essel Infraprojects insolvency proceeding connected to a guarantee-related claim by Jammu and Kashmir Bank.
