Supreme Court warns against unchecked AI use in courts after NCLT cites fake cases

The Supreme Court of India set aside an order of the National Company Law Tribunal (NCLT) in the Essel Infraprojects insolvency case after finding that the t...

What Happened

The Supreme Court of India set aside an order of the National Company Law Tribunal (NCLT) in the Essel Infraprojects insolvency case after finding that the tribunal had relied on non-existent, AI-generated ("hallucinated") judgments that do not exist in any legal record.
A bench of Justices P S Narasimha and Alok Aradhe held that reliance on hallucinated legal material "strikes at the integrity of adjudication and its processes" and directed all courts to adopt a "zero-tolerance" approach towards the use of unverified AI-generated precedents.
The court described AI hallucinations in judicial proceedings as "invisible, insidious, and catastrophic: like the release of methyl isocyanate in the province of law and justice — by the time anyone notices, it contaminates the very lifeblood of judicial determination."
While acknowledging that AI can be used as an assistive tool, the bench held that "human control over adjudication must remain total and absolute at every stage."
The Supreme Court directed the Bar Council of India (BCI) to constitute a committee of experts to examine the issues arising from the use of AI in adjudication, including ethical obligations and disciplinary consequences for advocates who submit fabricated citations.

Static Topic Bridges

AI Hallucinations and the Integrity of Legal Precedent

An AI hallucination occurs when a large language model generates plausible-sounding but entirely fabricated information — in the legal context, this means inventing case names, citation numbers, and even quoted paragraphs from judgments that do not exist. In legal proceedings, the doctrine of stare decisis (precedent-binding) means courts are obligated to follow prior rulings; if those rulings are fictitious, every downstream decision built on them is legally void. Globally, courts in the United States, Australia, and Canada have confronted similar incidents, but India's Supreme Court ruling is among the strongest judicial responses — it formally classified such conduct as professional misconduct under the Advocates Act, 1961.

Section 35 of the Advocates Act, 1961 empowers State Bar Councils to initiate disciplinary proceedings against an advocate for professional misconduct; penalties include reprimand, suspension, or removal from the roll.
The Bar Council of India, constituted under Section 4 of the Advocates Act, is the statutory body regulating legal practice in India.
A global database had tracked over 160 cases of AI-hallucinated legal citations across jurisdictions as of early 2026.
The Supreme Court's "zero-tolerance" standard means any reliance on an unverified AI-generated authority makes the resultant judicial order legally invalid.

Connection to this news: The NCLT's Essel Infraprojects order was set aside entirely on the basis that its reasoning relied on hallucinated citations — illustrating the direct legal consequence of unchecked AI use in adjudication.

National Company Law Tribunal (NCLT) — Jurisdiction and Constitutional Basis

The NCLT was established under Section 408 of the Companies Act, 2013 and became operational in June 2016. It replaced the Company Law Board and parts of the jurisdiction of High Courts in company matters. It functions as a quasi-judicial tribunal and is the Adjudicating Authority under the Insolvency and Bankruptcy Code (IBC), 2016, exercising wide powers under Section 60(5) of IBC over all questions of law or fact arising in corporate insolvency. Constitutionally, tribunals derive their basis from Article 323B of the Indian Constitution (inserted by the 42nd Amendment, 1976), which empowers Parliament to establish tribunals for specified matters including company law.

NCLT has benches across India; appeals lie to the National Company Law Appellate Tribunal (NCLAT) and thereafter to the Supreme Court.
Section 60(5) of IBC, 2016 gives NCLT residuary jurisdiction over all issues connected with corporate insolvency resolution or liquidation.
NCLT's orders have binding legal force; they can be set aside by NCLAT or the Supreme Court if found to be legally flawed.
The Essel Infraprojects case involved an insolvency resolution proceeding — exactly the kind of complex, precedent-heavy matter where AI research tools are most tempting but most dangerous.

Connection to this news: The NCLT, as a quasi-judicial body handling complex insolvency matters, was the specific forum where AI-generated fake citations entered the judicial record — and the Supreme Court's intervention underscores the accountability chain from tribunal to apex court.

Governance of Artificial Intelligence in India

India currently has no comprehensive AI-specific legislation, though the Information Technology Act, 2000 and sector-specific regulations apply in some contexts. The National Strategy for Artificial Intelligence (NSAI) was released by NITI Aayog in 2018, positioning India as an "AI for all" leader. The Digital India Act (under development as of 2026) proposes to address AI governance. At the global level, the EU's AI Act (2024) is the first major binding AI regulation, categorising AI applications by risk level. India's judiciary now faces the unique challenge of maintaining the integrity of legal records in an environment where AI tools are widely and freely available.

India's NITI Aayog released its AI ethics principles in 2021, emphasising accountability, explainability, and human oversight.
The Supreme Court's e-Committee has been working on integrating technology into courts under the Phase III of the e-Courts Mission Mode Project.
"AI hallucination" is a technical phenomenon rooted in how large language models generate text — by predicting statistically likely next tokens rather than retrieving verified facts.
The Bar Council of India was specifically directed to set up an expert committee — this could lead to formal guidelines on the use of AI tools in legal drafting and pleadings.

Connection to this news: The Supreme Court's ruling forces the question of how India governs AI in high-stakes professional domains, and the BCI committee's work could result in the first formal regulatory framework for AI in the Indian legal profession.

Key Facts & Data

Case: Essel Infraprojects insolvency — NCLT order set aside by Supreme Court for relying on AI-hallucinated judgments.
Bench: Justices P S Narasimha and Alok Aradhe.
Standard set: "Zero-tolerance" for unverified AI-generated precedents; human control over adjudication must remain "total and absolute."
Professional misconduct: Citing fabricated AI-generated judgments can attract proceedings under Section 35 of the Advocates Act, 1961.
Action directed: Bar Council of India to constitute an expert committee to examine AI use in adjudication.
NCLT established: June 2016 under Section 408, Companies Act, 2013; replaced Company Law Board.
IBC, 2016 — Section 60(5): NCLT's jurisdiction over all questions in corporate insolvency.
Article 323B: Constitutional basis for Parliament to create tribunals (inserted by 42nd Amendment, 1976).
Global AI hallucination cases: Over 160 tracked across jurisdictions as of early 2026.
Advocates Act, 1961 — Section 35: Disciplinary powers of State Bar Councils over advocates.
India's AI National Strategy: NITI Aayog, 2018 — "AI for All."