The Supreme Court overturned the insolvency order in Essel due to the tribunal’s use of false precedents created by AI | Today’s news
India’s Supreme Court on Thursday set aside orders passed by two insolvency tribunals after it found that the tribunal relied on false and non-existent artificial intelligence (AI) precedents in a landmark judgment on Essel Infraprojects Ltd.
The Supreme Court set aside the orders of both the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) admitting the company into corporate insolvency and remanded the matter back NCLT for a new judgment based on the facts.
The controversy caught the court’s attention when senior advocate Madhavi Divan, representing Essel Infraprojects Ltd, pointed out that several judgments which The NCLT relied on the fact that they either did not exist or contained passages that could not be found in the original judgments.
A bench comprising Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe said the courts must adopt a “zero tolerance” approach to the use of fake documents generated by artificial intelligence. The court added that the use of such hallucinatory material without proper verification seriously jeopardizes the integrity of the judicial process.
Independent verification performed by the company The Supreme Court confirmed the matter. He found that some citations referred to completely nonexistent rulings, while others cited actual Supreme Court decisions but contained fictional paragraphs attributed to the court.
The case stems from insolvency proceedings initiated by the Jammu & Kashmir Bank against Essel Infraprojects Ltd, which acted as a corporate guarantor for loans made to another firm. Pooja Ramesh Singh, suspended director of Essel Infraprojects, challenged the orders admitting the company to the insolvency resolution process under Section 7 of the petition. The Bombay Bench of the NCLT initially admitted the insolvency petition on 28 August 2024 and the NCLAT subsequently confirmed the order on 11 September 2025.
The role of AI in the courts
The court said the case raises broader concerns about the role of artificial intelligence in legal decision-making. While the judges clarified that they were not opposed to the use of artificial intelligence in legal practice or in the courts, they drew a sharp distinction between using artificial intelligence as an assistive tool and allowing it to replace human judgement, “because it is not just an aid to help us in our work, but an alternative to our own thinking, reasoning and even decision-making”.
The court emphasized that while AI can be used as a tool in the courts, there must be absolute human control over it at every stage. It also directed the Bar Council of India to form a committee to examine the issue in detail.
This is not the first time that Indian courts have drawn attention to inaccuracies generated by artificial intelligence. In January 2026, the Andhra Pradesh High Court warned the trial judge after finding that a lower court had cited four non-existent case laws created by an AI tool. Similarly, in 2025, the Supreme Court found that the rejoinder filed contained entirely fabricated citations, while the Bombay High Court struck down a tax assessment order that referred to fictitious judicial precedents.
In response to this growing trend, the Supreme Court issued draft regulations in June 2026. While the rules allow it AI tools for administrative and research functions such as legal research, drafting, translation, transcription and case management strictly prohibit their use in judicial decision-making or determining case outcomes. The draft specifically warned against the risks of AI hallucinations, inaccurate citations and unreliability of automated content.
