AUTHOR: Md. Ammaar is Founding member of the FairLex, and serving as the PR head for the platform.

Introduction

On 2 July 2026, the Supreme Court of India, in Pooja Ramesh Singh v. Jammu and Kashmir Bank Ltd. & Anr., delivered a judgment that will likely be remembered less for the insolvency dispute it formally resolved than for the institutional alarm it sounded. A Bench of Justices Pamidighantam Sri Narasimha and Alok Aradhe set aside the orders of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) after discovering that the very foundation of the Tribunal's reasoning rested on case law that simply did not exist but created by an artificial intelligence tool and accepted without a moment's verification. The case is a sobering marker of how generative AI has quietly begun to seep into the machinery of adjudication, and of the judiciary's determination to draw a hard line before the seepage becomes a flood.

The Factual Matrix

The appellant, a suspended director of Essel Infraprojects Ltd. (EIL), challenged the admission of a Section 7 application under the Insolvency and Bankruptcy Code, 2016, filed by Jammu and Kashmir Bank against EIL as corporate guarantor for loans extended to Pan India Utilities Distribution Company Ltd. The NCLT had admitted the application, finding debt and default established, and had rejected the appellant's argument that a corporate restructuring within the Essel group and a later sanction letter had extinguished the guarantee. The NCLAT upheld that view.

What should have been a fairly routine appeal on the interpretation of a guarantee clause took an unusual turn when senior counsel for the appellant pointed out that the very judgments the NCLT had relied upon to reject the appellant's contentions — cited verbatim by the NCLAT in its own order — were either wholly fictitious or misattributed. On independent verification, the Supreme Court found that of the six authorities cited, several carried case numbers that corresponded to entirely different judgments, while others, though correctly cited, contained paragraph excerpts that appeared nowhere in the actual reported decisions. In effect, the Tribunal had built its reasoning on a scaffold of invented law.

The Court's Core Holding

The Supreme Court's response was unambiguous. It held that a decision founded, even partly, on fabricated or hallucinated material cannot stand as a decision in the eyes of the law. The Bench went further than mere factual correction: it declared that even a single trace of such material entering the decision-making process is sufficient to vitiate the entire adjudication, since it strikes at the sanctity and integrity of the judicial process itself. This is a significant doctrinal statement. It does not ask whether the fake precedent was outcome-determinative — that is, whether the case would have been decided differently absent the fabricated citations. Instead, it treats the mere presence of hallucinated material in the reasoning as a structural defect that automatically vitiates the order, regardless of its bearing on the conclusion.

This is a deliberately strict standard, and understandably so. Once courts begin parsing "how much" hallucinated material is tolerable, or attempting to isolate its causal contribution to the final decision, the exercise becomes speculative and invites exactly the kind of erosion of trust the Court sought to prevent.