CAN NCLT AND NCLAT CAN RELAY ON NON‑EXISTENT, AI‑GENERATED CASE LAW? NO SAYS SUPREME COURT OF INDIA IN ESSEL INFRAPROJECTS INSOLVENCY CASE

 CAN NCLT AND NCLAT CAN RELAY ON NON‑EXISTENT, AI‑GENERATED CASE LAW? NO SAYS SUPREME COURT OF INDIA IN ESSEL INFRAPROJECTS INSOLVENCY CASE

FACTS

The Supreme Court of India has struck down insolvency orders against Essel Infraprojects Ltd after finding that the National Company Law Tribunal (NCLT) and Appellate Tribunal (NCLAT) relied on fake, AI‑generated case law.

NO DECISION IN THE EYES OF LAW

The Court declared such reliance “no decision in the eyes of law” and ordered a fresh fact‑based hearing, setting a precedent of zero tolerance for AI hallucinations in judicial proceedings.

SUPREME COURT DECISION:

·       Set aside both tribunal orders.

·       Restored the Section 7 application for fresh adjudication.

·       Declared that even an iota of fake or hallucinated material vitiates adjudication.

·       Directed the Bar Council of India to investigate AI misuse

SUPREME COURT’S OBSERVATIONS

ZERO TOLERANCE:	Any reliance on unverified AI‑generated precedents is misconduct by advocates and a serious lapse by judges.
INTEGRITY OF ADJUDICATION:	Fake citations “strike at the lifeblood of judicial determination” and contaminate justice like a toxic leak.
PROFESSIONAL MISCONDUCT:	Lawyers citing fabricated judgments without verification risk disciplinary action.
HUMAN CONTROL:	AI may assist but cannot replace judicial reasoning; adjudication must remain under total human oversight.

 

COMPLIANCE CHECKLIST POST‑SUPREME COURT RULING

1. VERIFICATION PROTOCOLS

MANDATORY SOURCE CHECK:

Every citation must be verified against authentic repositories (SCC Online, Manupatra, official Supreme Court/NCLT websites).

NO AI‑ONLY RELIANCE:

 AI outputs can be used for research but must be cross‑checked before submission.

CITATION AUDIT

Maintain records of where each case law was sourced.

2. LAW FIRM PRACTICES

Internal AI Usage Policy: Define permissible use of AI (research aid, drafting assistance) and prohibited use (generating precedents).

TRAINING & AWARENESS:

Conduct workshops for associates on risks of AI hallucinations.

PEER REVIEW:

Introduce a second‑lawyer check for pleadings involving case citations.

ETHICS COMPLIANCE:

 Align with Bar Council directives on professional misconduct.

WHY IT MATTERS

This is India’s first case where AI‑generated fake case law contaminated judicial reasoning. The SC’s strong stance sets a precedent for:

HUMAN‑IN‑LOOP PRINCIPLE:

 AI can assist but not replace judicial reasoning.

This ruling is a watershed moment in India’s legal system, ensuring that AI cannot undermine judicial integrity. It signals stricter compliance standards for advocates, tribunals, and corporate litigants alike.

#YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,