Key Observations of the Judgment
"No Decision in the Eyes of the Law": The Supreme Court ruled that any judicial order tainted by even an "iota" of fake, non-existent, or AI-hallucinated material is legally void, completely vitiating the integrity of the process.
Tribunal's Self-Generated Error: Uniquely, the fake precedents did not originate from the litigants' briefs; rather, the NCLT sourced them through its own independent research (presumably via an unverified AI tool).
Appellate Blindness: The NCLAT failed to catch the fabrication, confirming the flawed order without verifying a single citation.
Absolute Human Oversight: While welcoming AI as a helpful assistive tool for managing heavy dockets, the Bench drew a strict red line: human critical thinking and control must remain total and absolute at every stage.
Zero-Tolerance & Regulatory Mandate: The Court declared zero tolerance for unverified AI-generated content on both the Bar and the Bench, directing the Bar Council of India to formulate disciplinary frameworks for lawyers submitting fabricated material.
FULL JUDGMENT
2026 INSC 668 REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 11950 OF 2025
POOJA RAMESH SINGH …APPELLANT(S)
VERSUS
JAMMU AND KASHMIR BANK LTD. & ANR. …RESPONDENT(S)
J U D G M E N T
1. This is yet again a case where the Tribunal relied on non-existent,
fake and hallucinated material, generated through Artificial Intelligence1
(AI), as if it were a precedent in support of its judgment. For the reasons
to follow, we have set aside the judgment of NCLT, as well as the
judgment in appeal, to affirm and maintain the integrity of the adjudication
and its processes. More than the inevitable consequence of setting aside
such judgments, what is significant for our decision-making is our 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.
2. Artificial Intelligence has acquired the capability to better, if not fully
substitute, human effort, both routine and intellectual. This extraordinary
1 Also referred to as ‘AI’capability, amid increased workloads of modern life, is compelling
professionals to adapt and employ AI for intelligent, efficient and swift
functioning. The Solicitors Regulation Authority (SRA), a body created
under the United Kingdom Legal Services Act 20072
, approved in 2025,
the first purely Artificial Intelligence-driven law firm named Garfield Law
Limited (GLA), to provide regulated legal services3
. Further, that AI law
firm (GLA) is now reported to have successfully navigated the legal
system, securing a county court decree in a suit for recovery of unpaid
fee4
. The result can be gratifying, even inspiring; yet if left unregulated,
Artificial Intelligence may infiltrate our intellectual work ethic and, before
long, render us dependent on its vast capabilities. SRA acts as the independent regulator of solicitors for creating an effective deterrent and discouraging
professional misconduct by solicitors. A range of sanctions is available to the SRA, including prosecuting more
severe cases at the Solicitors Disciplinary Tribunal.
3 SRA approves first AI-driven law firm (Solicitors Regulation Authority, 2025)
. As per SRA News
Bulletin, Garfield Law was approved after checking its compliance on various parameters. The bulletin indicated:-
“Before authorising Garfield Law, we engaged with the owners to consider the firm's processes and
assure ourselves that our rules can be met by an AI service. For instance, we have sought reassurance
that there are appropriate processes in place to quality-check work, keep client information
confidential, and safeguard against conflicts of interests.
We have also checked the firm is managing the risk of 'AI hallucinations.' The system will not be able
to propose relevant case law, which is a high-risk area for large language model machine learning.
Garfield is not autonomous and will only take a step where the client has approved it, and furthermore
there are supervision and monitoring processes in place. This includes greater oversight of claims in
the initial launch phase, so that issues or risks can be identified.
Under our rules, named regulated solicitors will still ultimately be accountable for the firm delivering
high professional standards. This means they will also be responsible for all the system outputs and
for anything that goes wrong. All regulated law firms must also have a minimum level of insurance in
place to protect clients.”
4 Karl Flinders, ‘Artificial intelligence-based law firm wins in court’ (Computer Weekly, 2026)
.
3. Dependency on technology has never been a problem for the
dispensation of justice, as our courts have seamlessly absorbed
technologies and made them an integral part of court systems. The story
of AI, as it is unfolding, is, however, different, in fact, transformative, as it
is not just an aid to assist us in our work, but is an alternative to our own
thinking, reasoning and even decision making. This is where we need to
be extra cautious, as unregulated use of AI will insidiously enter legal
practice, the process of judicial decision-making and decision-making
itself.
4. Wisdom and foresight compel us to recognise human vulnerability
to seek comfort in delegation, but if thinking is delegated and it forms a
habit, it will have serious consequences for the core of human existence,
which lies in its capacity to think – to discern the distinction between what
is right and what is wrong, truth and falsehood, virtue and vice, dharma
and adharma. This capability is neither given nor superimposed by birth,
but arises from a deliberate, disciplined, and systematic training of the
mind alongside lived experiences; it is a battle of the mind against
bewitchment caused by the uncertainties between fact and fiction, what is
real and what is unreal, propriety and impropriety, as well as what is just
and unjust. This intellectual exercise, coupled with experience and
foresight, enables us to choose between competing values, as well as to
take hard decisions with courage and conviction, and to bring about a beautiful balance between the need for order and the quest for justice. A
struggle to arrive at truth, it is a Saadhana. In fact, the secret is in the
Saadhana itself, for without this deliberate, conscious, and continuous
practice of scientific temper, we lose the capability to discriminate
between what is right and what is wrong. Lose this, and we would have
lost everything.
5. It is therefore compelling and necessary to have absolute and total
control over the application and usage of AI. The control lies in being two
steps ahead of its application and in making deliberate choices about
when and where to apply. We are aware that this is not an issue that can
be resolved through judicial orders and declaratory judgments, but only
through Public Policy and enforceable Rules and Regulations. We are
also aware that the process has commenced, the Regulations are being
deliberated, and they will be notified after due process and in due course.
The real success is, however, not in the making of the Rule or Regulation,
but to be found in the power of the will of the Bar as well as the Bench, to
harness this science and apply it with care and caution. No other facet of
law and its practice has ever demanded a higher and deeper
corroboration and coordination between the Bar and the Bench than the
need to identify, decide, and apply AI to adjudication and the
determination of disputes.
6. At the same time, it is necessary to clarify the position of law
regarding a certain trait in AI’s responses, a tendency to generate nonexistent, fake, or hallucinated results when replying to a prompt. We are
neither concerned with the cause nor with the process of resolving such
hallucinations; it is for the engineers and scientists to deal with them. For
us, i.e., for those in the province of adjudication and determination of
disputes, this by-product of AI, i.e., the production of fake, non-existent,
and hallucinated material and its utilisation as precedents in law, is like
the release of methyl isocyanate in the province of law and justice:
invisible, insidious, and catastrophic by the time anyone notices. It not only
contaminates but takes away the very lifeblood of judicial determination.
7. 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, irrespective of whether such material
had a direct or indirect bearing on the decision-making. 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. It is absolutely necessary to maintain integrity in decision- making, and we reiterate and declare zero tolerance for the Bar as well as
the Bench to cite, refer to, or rely on such material. It is also clarified that
our judgment shall have no bearing on the rightful use of AI, but on the
presentation or reliance on fake or hallucinated material as if it were a
court precedent.
8. We are aware that mere declaration of prohibitory action is not
sufficient; there must be a consequential action following accountability.
9. So far as the responsibility of the bar is concerned, we direct the Bar
Council of India, being 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.
10. Returning to the facts of the case, it is noted that the appellant is a
suspended director of Essel Infraprojects Ltd. (‘EIL’), the corporate debtor
and corporate guarantor of the original borrower, namely Pan India
Utilities Distribution Company Ltd. (‘PIUDCL’). PIUDCL had availed
certain loan facilities from Jammu and Kashmir Bank Limited, Respondent
No. 1. To secure these credit facilities, a corporate guarantee was
executed by EIL. In due course, PIUDCL experienced severe financial stress and failed to maintain its repayment schedules, leading to the
classification of its loan accounts as non-performing assets.
11. Following continuous defaults, Respondent No. 1 filed an
application under Section 7 of the Insolvency and Bankruptcy Code, 2016,
before the National Company Law Tribunal, Mumbai, seeking initiation of
the corporate insolvency resolution process against the EIL/corporate
debtor for recovery of its outstanding financial debt.
12. The National Company Law Tribunal examined the submissions
and, upon finding the existence of debt and default, passed an order dated
28.08.2024 admitting the Section 7 application, appointing an Interim
Resolution Professional, and declaring a moratorium under Section 14 of
the Insolvency and Bankruptcy Code, 2016. Aggrieved by the admission
order, the appellant preferred an appeal before the National Company
Law Appellate Tribunal in Company Appeal (AT) (Insolvency) No. 1808 of
2024. Before the appellate tribunal, the appellant contended that the
NCLT erred by failing to consider that its liabilities had been transferred to
another company due to a scheme of demerger and a subsequent
amalgamation. The appellant further contended that a renewed sanction
letter dated 18.11.2017 did not mention the guarantee and therefore, the
guarantee was deemed to have been relinquished.
13. By the impugned final judgment and order dated 11.09.2025, the
NCLAT has dismissed the appeal, confirming the observations of the NCLT by observing that while it is not disputed that there were internal
adjustment by the ESSL group by way of
demerger/merger/amalgamation, it has no effect insofar as the liability of
the corporate guarantor is concerned because it has been categorically
mentioned in clause 8 of the guarantee deed that guarantee will not be
determined on event of absorption/amalgamation of corporate debtor with
any other company.5 The NCLAT also referred to judgments relied upon
by the NCLT in paragraph 12 of its opinion in the following manner:
“12. The Tribunal did not accept the contention of the CD and while
referring to the decisions of the Hon'ble Apex Court in the case of
State Bank of India Vs. M/s Shree Ram Urban Infrastructure Ltd.,
2020 SCC OnLine SC 341, Everest Kento Cylinders Ltd. Vs. Union
of India (2015) 2 SCC 1, ICICI Bank Ltd. Vs. Urban Infrastructure
Real Estate Ltd., (2019) 16 SCC 528, V.S Dempo & Co. Ltd. Vs.
Reliance Communications Ltd., (2021) 10 SCC 176, Canara Bank
Vs. N.G. Subbaraya Setty & Anr., (2018) 16 SCC 228 and Sarbjit
Singh Vs. Union Bank of India, (2022) 7 SCC 464 held that the
guarantee given by the CD shall still exist and will not be effected
where the two orders referred to herein above passed by the
Bombay High Court and admitted the petition because debt and
default was not denied.”
14. Aggrieved by the said decision, the appellant has preferred the
present appeal. Ms. Madhavi Divan, learned senior counsel appearing for
the appellant, at the outset, pointed out that the citations/judgments relied
upon by the NCLT to arrive at the impugned findings, as referred by the
appellate tribunal in paragraph 12 of its opinion, are fake and non-existent,
probably AI-generated. It is pointed out that even where case citations are
5 Clause 8: “this guarantee shall not be determined and not in any way prejudiced by any absorption or
by any amalgamation of the guarantor company with any other company, shall incur and be available
to the Bank till such time the loan accounts of the borrower company is adjusted in the books of accounts
of the bank.” accurate, the excerpted paragraphs from the judgment(s) are not
traceable to those judgments in law reports. Ms. Divan also advanced
brief arguments on the merits of the matter. The learned counsels
appearing for the respondents have countered the submissions on merits.
15. It is not in dispute that the judgments relied upon by the NCLT are
non-existent, and some AI-generated paragraphs are wrongly attributed
to genuine citations. An independent examination undertaken by us
reveals the following about the judgments relied upon by the adjudicating
authority: State Bank of India v. M/s Shree Ram Urban Infrastructure
Ltd., 2020 SCC OnLine SC 341 (cited in para 44 of NCLT judgment) –
Wrong citation of an existing reported judgment6 and a non-existent
paragraph, Everest Kento Cylinders Ltd. v. Union of India (2015) 2
SCC 1 (cited in para 45 of NCLT judgment) – Correct citation but nonexistent paragraph, ICICI Bank Ltd. v. Urban Infrastructure Real Estate
Ltd., (2019) 16 SCC 528 (cited in para 47 of NCLT judgment) – Nonexistent citation, V.S. Dempo & Co. Ltd. v. Reliance Communications
Ltd., (2021) 10 SCC 176 (cited in para 49 of NCLT judgment) – Nonexistent citation, Canara Bank v. N.G. Subbaraya Setty & Anr., (2018)
16 SCC 228 (cited in para 51 of NCLT judgment) – Correct citation but
6 Correct cause title for the cited judgment is M. Subramaniam v. S. Janaki, (2020) 16 SCC 728; 2020
SCC OnLine SC 341.
Page 10 of 11
non-existent paragraph and Sarbjit Singh v. Union Bank of India, (2022)
7 SCC 464 (cited in para 53 of NCLT judgment) – Non-existent citation.
16. Respondent No. 1 has filed an affidavit indicating that the alleged
judgments relied on by NCLT were not cited by its counsel at the bar. The
affidavit also indicates that the so-called precedents relied on by the
adjudicating authority were obtained through its own research. What
about the Appellate Tribunal? The fake, non-existent judgments escaped
scrutiny by the first statutory appellate tribunal. Today’s courts and
tribunals implicitly trust lawyers when referring to precedents cited before
them. Imagine the hardship of a situation in which the Court must verify
the authenticity of each judgment cited by an advocate.
17. Judicial process and the judgment under challenge are tainted by
the usage of materials which are said to be precedents, but in reality, they
are unreal, fake, and do not exist at all. 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 earliest7.
7 A prominent law firm of UK Pinsent Masons LLP utilised an internal artificial intelligence program carelessly
during a block transfer application. In that instance, a junior associate accepted a completely fabricated statutory
quote generated by the software without verifying it against authoritative legal texts, a critical error that went
entirely unnoticed by the supervising partners. When the High Court questioned the non-existent text, the firm
compounded the issue by submitting a subsequent letter containing an unconvincing, misleading explanation
engineered by the software to mask the initial hallucination. Although the presiding judge ultimately desisted from
instituting formal contempt of court proceedings due to a lack of deliberate dishonest intent, Anthony Malcolm
Cork & Anor v. Mark Smith, [2026] EWHC 1199 (Ch), the reckless oversight wasted judicial resources, prompted
a public admonishment from the bench, and forced the clients to transfer their matter to new legal representatives.
Eventually, Pinsent also referred itself to the SRA for a formal investigation by the regulatory body- ‘Pinsents’
botched AI use sparks dependency alarm’ (Law Society Gazette, 2026) .
18. For the reasons stated above, the judgment and orders passed by
the NCLT and NCLAT dated 28.08.2024 and 11.09.2025 are hereby set
aside. In view of the above, the Section 7 application, RCP (IB)
6/MB/2023, is restored to its original number.
19. The NCLT shall proceed with the said application and pass orders
in accordance with law. We make it clear that we have not expressed any
opinion on the merits of the case. It is for the adjudicating authority to
consider the facts and circumstances of the case to decide the case on its
own merits.
20. In view of the fact that the Section 7 application was filed long back,
it is directed that the adjudicating authority shall take up and dispose of
the said application expeditiously, preferably within a period of two weeks
from today. Pending disposal of the said Section 7 application, the parties
are directed to maintain the status quo as of today.
21. The appeal is disposed of in the above terms. Pending IAs, if any,
are disposed of accordingly.
………………………………....J.
[PAMIDIGHANTAM SRI NARASIMHA]
………………………………....J.
[ALOK ARADHE]
NEW DELHI;
JULY 02, 2026.
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