Zero tolerance for AI-generated fake precedents: Supreme Court strikes down NCLT order

The Supreme Court on Thursday set aside an order of the National Company Law Tribunal (NCLT) that was based on fictitious, AI-generated case laws. A Bench of Justices P.S. Narasimha and Alok Aradhe called the use of non-existent precedents 'catastrophic' to the judicial process and declared a 'zero-tolerance' approach towards such practices.

The Court observed that relying on AI-generated hallucinations without independent verification contaminates the 'lifeblood of judicial determination'. It warned that even a single instance of fake material entering the decision-making process violates the sanctity of adjudication and subverts the rule of law.

While acknowledging that artificial intelligence can improve efficiency amid increasing workloads, the Bench emphasised that human oversight must remain integral at every stage. It likened the unchecked use of AI-generated precedents to the release of methyl isocyanate—'invisible, insidious, and catastrophic by the time anyone notices'.

The Court also noted that the Supreme Court has already published the Draft Regulations for Use of Artificial Intelligence in Courts, 2026, for public consultation. These regulations restrict AI to an assistive role, require disclosure of AI-assisted filings, and prohibit AI in judicial decision-making, including sentencing and bail matters.

Additionally, the Bench directed the Bar Council of India (BCI) to constitute a committee to examine the issue and formulate norms, including disciplinary action for violations. It urged the BCI to take up the matter with 'utmost seriousness'.

The ruling came in an appeal by Pooja Ramesh Singh, a suspended director of Essel Infraprojects Ltd., who challenged the NCLT's decision to admit the company into insolvency proceedings based on a ₹200-crore default to Jammu and Kashmir Bank. The Court found that the NCLT had relied on fake case laws generated by AI, rendering its order unsustainable.