AI HALLUCINATIONS IN COURT: SUPREME COURT DECLARES ZERO TOLERANCE FOR FAKE LEGAL PRECEDENTS
CASE NAME
Pooja Ramesh Singh v. Jammu and Kashmir Bank Ltd. & Anr.
2026 INSC 668
BACKGROUND OF THE CASE
The appellant, Pooja Ramesh Singh, was a suspended director of the corporate guarantor of the loans availed by Pan India Utilities Distribution Company Ltd. (PIUDCL) by Jammu and Kashmir Bank Ltd. (JKBL). On receiving a financial default notice, the Bank initiated insolvency proceedings against EIL under Section 7 of the Insolvency and Bankruptcy Code, 20162. On 28 August 2024, the NCLT, Mumbai, accepted the application and appointed an Interim Resolution Professional and imposed a moratorium as per Section 14 of the IBC3. The appellant appealed against this order before the NCLAT, which rejected the appeal on 11th September, 2025.
The central dispute before the Supreme Court was, however, concerned the legality of the NCLT’s reliance upon fabricated and AI-generated legal authorities. The appellant pointed out that several judgments cited by the Tribunal were either non-existent, wrongly cited, or contained paragraphs that did not appear in the actual judgments. When independently verified, the Supreme Court accepted the discrepancies and found that some of the material appeared to be AI-generated or hallucinated. The respondent-bank also said that these authorities had not been cited by its counsel, indicating that the Tribunal had apparently obtained them through its own research. The case thus posed a significant issue about how, when and in whose name AI-produced content could be used, verified and held accountable in judicial proceedings.
ISSUES
1. Whether a judicial decision based upon fake, non-existent or AI-generated hallucinated precedents is legally sustainable.
2. Whether the NCLT and NCLAT judgments should be set aside on account of reliance upon such fabricated legal authorities.
3. Whether the use of AI in legal research and adjudication can be permitted without human verification and accountability.
4. Whether the Supreme Court should review and decide the merits of underlying insolvency proceedings following the finding that the proceedings were tainted by fake precedents.
REFERENCES
The Supreme Court relied upon sec 7 & 14 of the Insolvency and Bankruptcy Code, 2016, in the backdrop of the original insolvency proceedings. While examining the authorities relied upon by the NCLT, the Court found serious discrepancies in M/s Shree Ram Urban Infrastructure Ltd (2020)4, Everest Kento Cylinders Ltd (2015)5, Urban Infrastructure Real Estate Ltd(2019)6, Dempo & Co. Ltd (2021)7, N.G. Subbaraya Setty & Anr. (2018)8 and Sarbjit Singh (2022)9. The Court found that some citations were non-existent, some contained incorrect citations, and some attributed paragraphs that did not exist in the actual judgments.
The Court also referred to the experience of the Solicitors Regulation Authority (SRA) in the United Kingdom10 in authorising an artificial intelligence (AI) based law firm, which showed how essential it is to have human oversight, review, confidentiality, monitoring and accountability in the use of AI in legal services. It also cited the UK case of Anthony Malcolm Cork & Anor (2026)11 where fabricated statutory material created using artificial intelligence (AI) was used. The above references were cited to illustrate the general dangers of unvetted AI-written legal documents.
DECISION
1. The Supreme Court held that relying on a fake, non-existent precedent or a ‘hallucinated’ precedent is a fundamental violation of the judicial process. A ruling made on such a basis is “no decision” as far as the law is concerned and is a violation of the rule of law. The Court took a “zero tolerance” stance on using or citing or relying on AI-generated precedent without verification.
2. The Court set aside the NCLT order dated 28 August 2024 and the NCLAT judgement dated 11 September 2025 as the adjudicatory process was marred by reliance on fabricated authorities. The Section 7 application was reinstated in its original numbers for fresh consideration.
3. The Court clarified that its judgment does not prohibit the rightful use of AI. It can be utilized as a tool to enhance efficiency and support legal tasks. However, its outputs cannot be blindly relied upon. The Court highlighted the importance of having “a human in the loop at each stage”, to keep the concept of human reasoning, verification, and accountability at the centre of adjudication.
4. The Court held that it would amount to misconduct on part of an advocate to cite AI-generated fake judgments without proper verification. Similarly, reliance upon such fabricated material by a judge or adjudicating authority constitutes a serious lapse. The Court directed the Bar Council of India to constitute a committee to examine the issue, and formulate guiding principles and disciplinary measures if the guidelines are breached.
5. The Court expressly stated that it had not rendered any opinion on the merits of the corporate guarantee or insolvency dispute. The NCLT was directed to reconsider Section 7 application on its own and decide it on the basis of law, preferably within two weeks, meanwhile maintaining the status quo.
RELEVANCE
This judgment will prove to be significant in the contemporary era, where AI is increasingly permeating every field including law. The judgement acknowledges that the use of technology must not be allowed to undermine the rule of law and compromise the essence of fair judicial decision-making. The Court notes that AI can boost the effectiveness of legal research, but cannot replace the need for human review and de novo application of legal reasoning.
From a human perspective, the judgment poses a greater question of the creeping diminishment of human thinking to technology. Judicial decision-making cannot be merely delegated to an AI system as it requires the ability to distinguish truth from falsehood, fact from fiction and justice from injustice. Excessive dependence on AI may therefore weaken the critical thinking, professional judgment and intellectual discipline that form the foundation of the legal profession.
The judgment thus sets a required paradigm of innovation and responsibility for human beings. AI can help lawyers and judges, but the task of consulting authorities, understanding the law, and determining the outcome of matters must be done by people. The Court’s emphasis on “a human in the loop at every stage” makes it clear that while technology might help the administration of justice, it should never take the place of the human reasoning that is how justice is actually delivered.
REFERENCES
- Pooja Ramesh Singh v. Jammu and Kashmir Bank Ltd. & Anr., 2026 INSC 668 (Supreme Court of India, 2 July 2026).
- Insolvency and Bankruptcy Code, 2016, sec 7 (India).
- Insolvency and Bankruptcy Code, 2016, sec 14 (India).
- State Bank of India v. M/s Shree Ram Urban Infrastructure Ltd., 2020 SCC OnLine SC 341 (Supreme Court noted the correct cause title corresponding to the citation was M. Subramaniam v. S. Janaki, (2020) 16 SCC 728).
- Everest Kento Cylinders Ltd. v. Union of India, (2015) 2 SCC 1.
- ICICI Bank Ltd. v. Urban Infrastructure Real Estate Ltd., (2019) 16 SCC 528.
- V.S. Dempo & Co. Ltd. v. Reliance Communications Ltd., (2021) 10 SCC 176.
- Canara Bank v. N.G. Subbaraya Setty & Anr., (2018) 16 SCC 228.
- Sarbjit Singh v. Union Bank of India, (2022) 7 SCC 464.
- Solicitors Regulation Authority, ‘SRA approves first AI-driven law firm’, SRA News, 2025.
- Anthony Malcolm Cork & Anor v. Mark Smith, (2026) EWHC 1199 (Ch).
