SC express concern over AI generated judgments/paragraphs escaping scrutiny by NCLT/NCLAT

Supreme Court expresses serious concerns over AI generated judgments/paragraphs relied upon by the NCLT/NCLAT

In a recent judgment, the Hon’ble Supreme Court has expressed serious concerns over judgments relied upon by the NCLT which were non-existent, some AI-generated paragraphs wrongly attributed to genuine citations.

ABCAUS Case Law Citation:
5177 (2026) (07) abacus.in SC

In the instant case, the appellant was a suspended director of the corporate guarantor company of the corporate debtor (CD). The said CD experienced severe financial stress and failed to maintain its repayment schedules, leading to the classification of its loan accounts as non-performing assets.

As a result, the respondent bank filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC 2016), before the National Company Law Tribunal (NCLT) seeking initiation of the corporate insolvency resolution process against the corporate debtor for recovery of its outstanding financial debt.

The NCLT appointed an Interim Resolution Professional, and declaring a moratorium under Section 14 of the IBC 2016. Aggrieved by the admission order, the appellant preferred an appeal before the National Company Law Appellate Tribunal (NCLAT).

However, the NCLAT dismissed the appeal, confirming the observations of the NCLT. The NCLAT also referred to judgments of the Hon’ble Supreme Court relied upon by the NCLT.

Aggrieved by the decision of the NCLAT, the appellant preferred appeal before the Hon’ble Supreme Court and inter alia pointed out that the citations/judgments relied upon by the NCLT to arrive at the impugned findings were fake and non-existent, probably AI-generated. It was pointed out that even where case citations were accurate, the excerpted paragraphs from the judgment(s) were not traceable to those judgments in law reports.

The Hon’ble Supreme Court observed that undisputably the judgments relied upon by the NCLT were non-existent, and some AI-generated paragraphs are wrongly attributed to genuine citations.

Interestingly, the respondent bank filed an affidavit indicating that the alleged judgments relied on by NCLT were not cited by its counsel at the bar. The affidavit also indicated that the so-called precedents relied on by the adjudicating authority were obtained through its own research.

The Hon’ble Supreme Court was surprised to see that the fake, non-existent judgments escaped scrutiny by the first statutory appellate tribunal.

Their Lordships observed that today’s courts and tribunals implicitly trust lawyers when referring to precedents cited before them because of the hardship of a situation in which the Court must verify the authenticity of each judgment cited by an advocate.

The Hon’ble Supreme Court opined that a decision of a Court or an adjudicating authority based on material which is fake and hallucinated is no decision at all, and it amounts to subversion of the rule of law. Such a decision is unsustainable and has to be set aside at the earliest.

The Hon’ble Supreme Court concluded that the Tribunal relied on non-existent, fake and hallucinated material, generated through Artificial Intelligence (AI), as if it were a precedent in support of its judgment. The Hon’ble Supreme Court stressed that what is significant for decision-making, resolve to adopt AI technology in aid of adjudication, while at the same time asserting and declaring total and absolute control over adjudication, with a human in the loop at every stage.

The Hon’ble Supreme Court opined that 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.

The Hon’ble Supreme Court directed the Bar Council of India, the apex statutory body, to constitute a committee and deliberate on this issue of members of the bar submitting such fake and hallucinated material before the Court as if they are precedents of law. The Bar Council must take up this issue with utmost seriousness, deliberate earnestly, and prescribe a guiding principle to prevent such occurrences, along with the disciplinary action that will follow a violation of the norms.  

Accordingly, the judgment and orders passed by the NCLT and NCLAT were set aside and the case was restored to its original number. The NCLT was directed to proceed with the said application and pass orders in accordance with law.

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