AI Hallucinations Invalidate Court Rulings in India

The Supreme Court has nullified orders from the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) in an insolvency case, after discovering the rulings relied on fabricated or AI-generated legal precedents. The court has sent the case back to the NCLT for a new review, instructing it to proceed without being influenced by the "hallucinated" citations.

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judicial decision founded on non-existent precedents cannot stand, and that any ruling tainted by even “an iota” of such material is “no decision in the eyes of law”

In its ruling, the bench emphasized that a judicial decision based on non-existent precedents cannot be upheld. It stated that any ruling tainted by even a small amount of such material is legally invalid, irrespective of whether the fake precedent ultimately influenced the outcome. The court likened the danger of AI-generated precedents to the methyl isocyanate gas that caused thousands of deaths in the 1984 Bhopal disaster, describing such material as "invisible, insidious, and catastrophic by the time anyone notices."

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invisible, insidious, and catastrophic by the time anyone notices

The court further directed the Bar Council of India to establish a committee. This committee will investigate lawyers who present fake or AI-generated material as genuine precedents to courts. It will also develop guidelines with disciplinary actions for violations. The court mandated a "zero tolerance" policy for citing or relying on such material, classifying an advocate who cites hallucinated judgments as guilty of professional misconduct and a judge who relies on them as having committed a serious lapse.

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contaminates the judicial process

The case originated from insolvency proceedings initiated by Jammu and Kashmir Bank Ltd against Essel Infraprojects Ltd (EIL). EIL had provided a corporate guarantee for credit facilities to Pan India Utilities Distribution Company Ltd. When the latter defaulted, the bank pursued EIL as guarantor. The NCLT admitted the bank's application, but EIL appealed to the NCLAT, arguing that the tribunal had not considered the transfer of liabilities and that a renewed sanction letter did not mention the guarantee, implying its relinquishment. The NCLAT rejected this argument.

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zero tolerance