Supreme Court Quashes Orders Over AI-Generated Precedents

The Supreme Court set aside orders from the NCLT and NCLAT in an insolvency case after finding both tribunals had relied on fake, AI-hallucinated judicial precedents, according to LiveLaw. The underlying dispute arose from insolvency proceedings that Jammu & Kashmir Bank initiated under Section 7 of the Insolvency and Bankruptcy Code against Essel Infraprojects Ltd., which had furnished a corporate guarantee for credit facilities extended to Pan India Utilities Distribution Company Ltd. The NCLT's Mumbai bench admitted the application on August 28, 2024, recording a default of 87.43 crore rupees, and the NCLAT affirmed that order on September 11, 2025, per LiveLaw.

Senior Advocate Madhavi Divan, representing suspended Essel Infraprojects director Pooja Ramesh Singh, told the court the tribunals had relied on six judicial decisions that either did not exist or did not support the propositions attributed to them. LiveLaw reports the impugned orders cited purported precedents including "State Bank of India v. Shree Ram Urban Infrastructure", "Everest Kento Cylinders v. Union of India", and "ICICI Bank v. Urban Infrastructure Real Estate" -- none of which could be traced in any recognized legal database. A bench of Justices P.S. Narasimha and Alok Aradhe accepted the submission, holding that judgments founded on non-existent precedents cannot stand, and remanded the matter to the NCLT for fresh, fact-based consideration.

Per LiveLaw's verbatim report, the bench described the fabrication of AI-generated citations as "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 would not rule on the technical causes of AI hallucination -- "it is for the engineers and scientists to deal with them" -- but stressed that adjudication must remain under "total and absolute control" of humans, "with a human in the loop at every stage." The bench also directed the Bar Council of India to constitute a committee of experts to examine AI's use in adjudication.

This is the same bench's second recent public intervention on AI-fabricated citations: LiveLaw notes Justice Narasimha previously flagged a trial court's use of AI-generated fake judgments as professional misconduct in an earlier matter, and the Supreme Court published draft AI-use regulations for the judiciary last month. For teams building legal-research, retrieval-augmented, or citation-generation tools, the ruling underscores that outputs lacking auditable, verifiable links to primary case law carry real legal exposure -- not just for the model provider, but for any professional or tribunal that relies on them without independent verification.

The Bar Council of India's expert committee, and any resulting guidance on mandatory citation verification or disciplinary standards for lawyers and courts using generative AI tools in filings and adjudication.