AI-Hallucinated Fake Judgments Are Like 'Release Of Methyl Isocyanate' In Justice System: Supreme Court

The Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe made the observation while setting aside orders passed by the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT), after finding that the adjudicating authority had relied on several fake and non-existent judicial precedents while deciding an insolvency dispute.

The Court said the judicial process had been fundamentally compromised by the use of fabricated authorities masquerading as binding precedents. "The production of fake, non-existent, and hallucinated material and its utilisation as precedents in law are like the release of methyl isocyanate in the province of law and justice. They pollute and poison the stream of justice, rendering adjudication unreliable and eroding public confidence in the legal system," the Bench observed.

The Bench declared zero tolerance for both the Bar and the Bench in citing, referring to or relying upon such fabricated material.

"We reiterate and declare zero tolerance for the Bar as well as the Bench to cite, refer to, or rely on such material," the Court said, clarifying that its observations were not directed against the legitimate use of artificial intelligence, but against presenting fake or hallucinated content as authentic judicial precedents.

Fake Judgments Escaped Scruitiny

The issue came to light during the hearing of an appeal challenging insolvency proceedings initiated against Essel Infraprojects Ltd. Senior Advocate Madhavi Divan, appearing for the appellant, pointed out that several Supreme Court decisions relied upon by the NCLT either did not exist or contained AI-generated paragraphs wrongly attributed to genuine judgments.

Upon independently examining the cited authorities, the Supreme Court found multiple irregularities. Some citations referred to non-existent judgments, while others cited genuine cases but attributed fictional passages to them. In one instance, an entirely incorrect case title had been used against an existing citation.

The Court also noted that Jammu and Kashmir Bank, the financial creditor, had filed an affidavit stating that these fabricated precedents had not been cited by its counsel. According to the affidavit, the impugned authorities had been sourced by the adjudicating authority through its own research.

Expressing concern, the Bench questioned how the fabricated material had escaped scrutiny not only before the NCLT but also before the NCLAT.

"Today's courts and tribunals implicitly trust lawyers when referring to precedents cited before them. Imagine the hardship of a situation in which the Court must verify the authenticity of each judgment cited by an advocate," the Court observed.

Decision based on Fake Material cannot stand

The Supreme Court held that any judicial decision founded upon fake or hallucinated precedents is legally unsustainable.

"The judicial process and the judgment under challenge are tainted by the usage of materials which are said to be precedents, but in reality, they are unreal, fake, and do not exist at all. A decision of a Court or an adjudicating authority based on material which is fake and hallucinated is no decision at all, and it amounts to subversion of the rule of law," the Bench held.

Consequently, the Court set aside both the NCLT's admission order dated August 28, 2024, and the NCLAT's appellate judgment dated September 11, 2025. The Section 7 insolvency application was restored to the NCLT for fresh adjudication in accordance with law, with the tribunal directed to dispose of it expeditiously, preferably within two weeks.

Bar Council Directed to frame guidelines

Recognising that merely condemning the practice would not be sufficient, the Supreme Court directed the Bar Council of India (BCI) to constitute a committee to examine the issue of lawyers placing fake or AI-generated precedents before courts.

The committee has been asked to formulate guiding principles to prevent such occurrences and recommend disciplinary consequences for violations. "...we direct the Bar Council of India, being the apex statutory body, to constitute a committee and deliberate on this issue of members of the bar submitting such fake and hallucinated material before the Court as if they are precedents of law. The Bar Council must take up this issue with utmost seriousness, deliberate earnestly, and prescribe a guiding principle to prevent such occurrences, along with the disciplinary action that will follow a violation of the norms," the Court ordered.