New Delhi: The Supreme Court has set aside orders of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) after finding they relied on non-existent, AI-generated “hallucinated” judicial precedents while deciding an insolvency dispute.
The apex court also directed the Bar Council of India (BCI) to form an expert committee to examine the use of artificial intelligence in adjudication and legal practice.
A bench of Justices P.S. Narasimha and Alok Aradhe stressed that while AI can assist judges and lawyers, adjudication must remain under “total and absolute” human control.
The court warned that fabricated AI-generated material poses a serious threat to the justice system, comparing its impact to the release of methyl isocyanate due to its “invisibly insidious and catastrophic” nature.
The case arose from insolvency proceedings initiated by Jammu and Kashmir Bank against Essel Infraprojects Ltd. The NCLT admitted the plea in August 2024, recording a default of ₹87.43 crore, and the NCLAT upheld the decision in September 2025.
Senior Advocate Madhavi Divan argued that the tribunals relied on six fake judicial precedents. An affidavit confirmed the cited cases did not exist in any recognised legal database.
Accepting the submissions, the Supreme Court remanded the matter to the NCLT for fresh adjudication without relying on fabricated AI-generated citations.
