No justice based on AI! Big decision of Supreme Court, orders of NCLT-NCLAT canceled due to fake legal precedents

The Supreme Court on Thursday set aside the orders of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) in the Essel Infraprojects bankruptcy case. The court found that NCLT, for example, used content that did not actually exist, was fake and was artificial information generated by AI. The Supreme Court said that such use of AI is invisible, dangerous and destructive to justice.

The Supreme Court further said that using fake, non-existent and AI generated material as a legal precedent is like the leakage of methyl isocyanate gas in the field of law and justice. The court warned against the uncontrolled use of AI in legal decisions. The Supreme Court further said that AI can help in decisions, but humans should have complete and final control at every step.

In the Supreme Court, Justice P.S. A bench of Justices Narasimha and Alok Aradhe directed the Bar Council of India to form an expert committee to examine the use of AI in legal practice and decisions. The court has warned that AI is not just a helping tool, but it can also become a substitute for human thinking, reasoning and decision-making ability.

Decisions of both NCLT and NCLAT canceled

The bench said, ‘What is more important than the inevitable consequence of setting aside such a decision is that we are determined to adopt AI technology to aid adjudication. At the same time they claim and declare complete and absolute control over adjudication with human participation at every level. The court said, ‘As far as the decision on facts is concerned, we set aside the decisions of both NCLT and NCLAT and ask the tribunals to take the decision on the basis of facts’.

What is the whole matter?

Actually, this appeal pertains to the insolvency proceedings initiated by Jammu and Kashmir Bank Limited under Section 7 of the Insolvency and Bankruptcy Code against Essel Infraprojects Limited (EIL), which had given corporate guarantee for the credit facilities extended to Pan India Utilities Distribution Company Limited. The Mumbai-based National Company Law Tribunal, while admitting the bankruptcy petition on August 28, 2024, had recorded a default of Rs 87.43 crore and the NCLAT had upheld the decision on September 11, 2025.

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