Pooja Ramesh Singh: Supreme Court sets aside AI-tainted NCLT/NCLAT orders
Held The Supreme Court held that a decision founded on fake, non-existent or hallucinated material presented as precedent is no decision in law and subverts the rule of law. It set aside the NCLT and NCLAT orders, restored the Section 7 application, and left the merits open.
- Case
- Pooja Ramesh Singh v. Jammu and Kashmir Bank Ltd & Anr.
- Court
- Supreme Court of India
- Citation
- 2026 INSC 668
- Case No.
- Civil Appeal No. 11950 of 2025
- Decided
- 02 Jul 2026
- Bench
- Pamidighantam Narasimha, Alok Aradhe
- Issue
- Whether reliance by an adjudicating authority on fake or hallucinated AI-generated precedents invalidates the resulting decision.
- Outcome
- Appeal disposed of; NCLT/NCLAT orders set aside and Section 7 application restored.
Read the full judgment → Draft from this precedent →
Ratio / rule laid down
Courts and tribunals must maintain zero tolerance for citing, producing or relying on AI-generated precedents without verification. Even an iota of such material entering the decision-making process vitiates adjudication, irrespective of whether it directly or indirectly influenced the result.
Why this matters for lawyers
- Advocates remain responsible for verifying every authority generated or located through AI tools; unverified citation may amount to misconduct.
- Tribunals and courts cannot treat AI output as authority without independent verification against authoritative legal texts and law reports.
- A challenge should identify the precise fabricated citation, non-existent paragraph or misattributed passage and show its entry into the reasoning process.
- The judgment does not prohibit the rightful use of AI. It requires human control at every stage and distinguishes research assistance from presenting hallucinated output as precedent.
- Where fake material has entered adjudication, the decision is vulnerable to being set aside even without proof that the material was outcome-determinative. The Bar Council of India must constitute a committee to formulate guidance and disciplinary consequences.
Facts
Pooja Ramesh Singh, a suspended director of Essel Infraprojects Ltd. (EIL), challenged insolvency proceedings against EIL, the corporate debtor and corporate guarantor of Pan India Utilities Distribution Company Ltd. EIL had furnished a corporate guarantee securing PIUDCL's facilities from Jammu and Kashmir Bank Ltd.; PIUDCL defaulted and its accounts became non-performing assets.
The NCLT admitted the bank's Section 7 application on 28.08.2024, appointed an Interim Resolution Professional and declared a moratorium under Section 14. The NCLAT dismissed the appeal on 11.09.2025, holding that the guarantee survived the group's demerger, merger and amalgamation under clause 8 of the guarantee deed. Its reasoning reproduced authorities relied upon by the NCLT.
Issues
- Whether the NCLT's reliance on purported precedents that were fake, non-existent or contained AI-generated passages invalidated its order and the NCLAT's affirmance.
- Whether the Supreme Court should decide the appellant's substantive objections concerning the demerger/amalgamation and the alleged relinquishment of the guarantee.
- What institutional safeguards and professional consequences should follow the use of hallucinated material as legal precedent.
Court's Reasoning
The Court independently audited the authorities cited by the NCLT. It found that *State Bank of India v. M/s Shree Ram Urban Infrastructure Ltd.* carried a wrong citation and a non-existent paragraph; *Everest Kento Cylinders Ltd. v. Union of India* had the correct citation but a non-existent paragraph; and the citations to *ICICI Bank Ltd. v. Urban Infrastructure Real Estate Ltd.*, *V.S. Dempo & Co. Ltd. v. Reliance Communications Ltd.* and *Sarbjit Singh v. Union Bank of India* were non-existent. The citation described as *Canara Bank v. N.G. Subbaraya Setty & Anr.* was correct, but the paragraph attributed to it did not exist. The correct authority corresponding to the first citation was identified as *M. Subramaniam v. S. Janaki*, (2020) 16 SCC 728 : 2020 SCC OnLine SC 341.
Respondent No. 1's affidavit stated that its counsel had not cited those judgments; the NCLT had obtained them through its own research. The Court held that the judicial process was therefore tainted by material presented as precedent although it was unreal and did not exist. Such reliance is not a curable evidentiary or peripheral error: it makes the decision no decision at all, because it subverts the rule of law and the integrity of adjudication. The Court extended the zero-tolerance rule to both Bar and Bench, while clarifying that lawful use of AI as an aid is not prohibited.
Since the impugned orders were vitiated, the Court did not examine the guarantee, corporate restructuring or debt-and-default issues. The Section 7 application was restored for fresh determination, with directions for expeditious disposal, preferably within two weeks, and maintenance of status quo meanwhile.
“It is a misconduct on the part of an advocate to cite such judgments without verification.”
“A decision of a Court or an adjudicating authority based on material which is fake and hallucinated is no decision at all”
Key Takeaways
- A court or tribunal decision based on fake or hallucinated material is legally unsustainable, regardless of whether the material had a direct or indirect bearing on the outcome.
- Verification is mandatory before any AI-generated authority is cited, produced or relied upon in adjudication.
- The duty applies equally to advocates and adjudicators; the Court characterised unverified citation by an advocate as misconduct and judicial reliance as a serious lapse.
- Setting aside the tainted order does not decide the underlying dispute; the matter ordinarily returns for adjudication on verified material and the actual merits.
- The Bar Council of India was directed to formulate guidance and disciplinary action concerning submission of fake or hallucinated precedents.
Important Observations
The Court framed AI as an aid that must remain under absolute and total human control, with a human in the loop at every stage. It distinguished technological assistance from delegation of legal reasoning and decision-making, warning that unregulated dependence can erode the capacity to distinguish fact from fiction and truth from falsehood.
What Remains Unresolved
The Court expressly recorded that it had not expressed any opinion on the merits. The NCLT must reconsider the Section 7 application, including the appellant's objections concerning the demerger/amalgamation, the renewed sanction letter dated 18.11.2017 and the continuing effect of the corporate guarantee.
Precedents discussed
- M. Subramaniam v. S. Janaki(2020) 16 SCC 728 : 2020 SCC OnLine SC 341Referred to
Identified as the correct cause title for the citation wrongly attributed by the NCLT.
Source judgment: Pooja Ramesh Singh v. Jammu and Kashmir Bank Ltd & Anr. · Bench: Pamidighantam Narasimha, Alok Aradhe