Facts
The appellant, a suspended director of the corporate guarantor, challenged the admission of insolvency proceedings under S.7 Insolvency and Bankruptcy Code, 2016 against the corporate guarantor. The NCLT admitted the application, and the NCLAT affirmed the order by relying on several purported Supreme Court precedents. Before the Supreme Court, it was demonstrated that many of the cited judgments were either non-existent, wrongly cited, or contained AI-generated and fabricated extracts.
Issues Framed
Whether judgments founded upon fake or AI-generated hallucinated precedents can be sustained, and what principles should govern the use of Artificial Intelligence in judicial decision-making.
Court's Reasoning
(a) Legal Rule
The Court held that AI may be used only as an aid to adjudication, with human supervision at every stage. Courts must adopt zero tolerance towards producing, citing or relying upon AI-generated fake or hallucinated precedents. A decision based upon such material loses its legal sanctity and is liable to be set aside irrespective of whether the fabricated material materially influenced the outcome.
(b) Precedents and Authorities Relied Upon
The Court independently examined the authorities cited by the NCLT and found that several were non-existent or contained fabricated paragraphs. It also referred to foreign regulatory developments concerning AI-assisted legal practice and decisions explaining the consequences of reliance on AI-generated hallucinations, while emphasising that the issue before it concerned preservation of the integrity of adjudication.
(c) Application
The Court found that the NCLT had relied upon fake and hallucinated precedents, and the NCLAT failed to detect the error while affirming the decision. This tainted the judicial process itself, rendering both orders unsustainable irrespective of the merits of the insolvency dispute.
(d) Treatment of Counterarguments
Although the respondent bank stated that its counsel had not cited the fabricated authorities and that the NCLT had relied upon its own research, the Court held that the source of the hallucinated material was immaterial. Once adjudication is founded upon fake precedents, the resulting decision cannot be permitted to stand. The Court also directed the Bar Council of India to frame appropriate norms and consider disciplinary measures regarding submission of AI-generated fake authorities.
Held
The appeal was allowed. The judgments of the NCLT and NCLAT were set aside, the S.7 Insolvency and Bankruptcy Code, 2016 application was restored for fresh consideration, status quo was directed to be maintained, and the NCLT was requested to dispose of the matter expeditiously, preferably within two weeks.
Ratio
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 in support of the determination. 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.
Case Details
Citation: 2026 INSC 668
Decided on: 2 July 2026
Case Title: Pooja Ramesh Singh v. Jammu and Kashmir Bank Ltd. & Anr.
Court: Supreme Court of India
Bench: Pamidighantam Sri Narasimha, J.; Alok Aradhe, J.