In a landmark judgment highlighting the challenges posed by the increasing use of artificial intelligence in the legal system, the Supreme Court set aside the orders of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) after finding that they had relied on non-existent judicial precedents generated through artificial intelligence. The Court held that judicial decisions founded upon fabricated legal authorities cannot be sustained and reiterated that while AI may assist legal research and judicial administration, it cannot replace independent human reasoning and judicial scrutiny. The Court also directed the Bar Council of India (BCI) to constitute a committee of experts to examine the ethical and professional implications of AI usage in legal practice.
The matter arose from insolvency proceedings under the Insolvency and Bankruptcy Code. During the hearing before the Supreme Court, it came to light that both the NCLT and the NCLAT had relied upon several judicial decisions that either did not exist or had been incorrectly cited in support of their conclusions. Upon verification through recognized legal resources, it was found that these citations were fabricated and appeared to have originated from AI-generated content rather than authentic judicial precedents. This discovery prompted the Supreme Court to closely examine the validity of the impugned judgments.
After considering the matter, the Supreme Court concluded that judicial orders based on fictitious precedents suffer from a fundamental legal defect. The Court observed that the administration of justice depends upon accurate application of the law and reliance on genuine judicial authorities. Since the impugned orders were influenced by non-existent case law, they could not be allowed to stand. Accordingly, the Court set aside the judgments of both the NCLT and the NCLAT and remanded the matter to the NCLT for fresh adjudication in accordance with law, directing that the case be decided independently without reference to any fabricated citations.
The Supreme Court made extensive observations regarding the role of artificial intelligence in the legal profession. It acknowledged that AI possesses enormous potential to improve efficiency by assisting lawyers and judges in legal research, document analysis, case management, and drafting. However, the Court categorically held that adjudication must always remain under the exclusive control of human judges. The interpretation of statutes, appreciation of evidence, evaluation of legal arguments, and application of judicial precedents require human judgment, legal experience, and constitutional sensitivity, none of which can be delegated to artificial intelligence.
The Court expressed particular concern over the phenomenon commonly known as AI "hallucinations," whereby AI systems generate information that appears authoritative but is, in reality, entirely false. In the legal field, such hallucinations may result in fabricated judicial precedents, incorrect statutory references, or inaccurate legal principles. The Court observed that these errors pose a serious threat to the administration of justice because they have the potential to mislead courts, lawyers, and litigants, thereby undermining public confidence in the judicial system.
Emphasizing the gravity of the issue, the Supreme Court observed that reliance on AI-generated fake citations is capable of causing serious and far-reaching consequences for the legal system. Judicial decisions must be based only on authentic legal authorities that can be independently verified. Any judgment founded upon fabricated precedents compromises the integrity of judicial reasoning and erodes the credibility of the justice delivery mechanism. The Court therefore stressed that every legal authority cited before a court must be carefully verified before being relied upon in judicial proceedings.
Recognizing that artificial intelligence is becoming increasingly integrated into legal practice, the Supreme Court directed the Bar Council of India to constitute a committee of experts to study the legal, ethical, and professional issues arising from its use. The committee has been tasked with examining the manner in which AI is being used in legal research, drafting, litigation, and adjudication, and to recommend appropriate safeguards to ensure that technological advancements strengthen rather than undermine the administration of justice.
The Court also highlighted the continuing professional responsibility of advocates and judicial officers to independently verify every legal proposition and judicial precedent cited in pleadings or judgments. The availability of AI-assisted research tools does not diminish the obligation of legal professionals to exercise due diligence. Whether legal submissions are prepared manually or with technological assistance, the responsibility for ensuring their accuracy and authenticity remains entirely with the person relying upon them.
The judgment serves as an important reminder that technological innovation, however advanced, cannot substitute human judgment in matters involving the administration of justice. Artificial intelligence may function as a valuable research and drafting aid, but it cannot replace judicial reasoning, legal analysis, or independent application of mind. The Court emphasized that the rule of law depends upon accuracy, transparency, and accountability, all of which require careful human oversight.
By setting aside the orders of the NCLT and the NCLAT, the Supreme Court has laid down an important precedent for the responsible use of artificial intelligence in the legal profession. The ruling reinforces that courts and tribunals must exercise caution while using AI-generated material and must ensure that every legal citation is genuine and verifiable before it forms the basis of a judicial decision. The judgment is expected to influence future policy on the use of artificial intelligence in legal practice and judicial proceedings, while preserving the integrity, credibility, and fairness of the justice delivery system.
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