Court Name: Supreme Court of India
Bench: Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe
Date of Judgment : 2nd of July 2026
CITATION : 2026 INSC 668
Background of the case
The Appellant, Pooja Ramesh Singh, is a suspended director of Essel Infraprojects Ltd. ‘EIL’, the corporate debtor and corporate guarantor of the original borrower Pan India Utilities Distribution Company Ltd. ‘PIUDCL’. PIUDCL had availed certain loans from Jammu and Kashmir Bank Limited the Respondent . To secure these credit facilities EIL was the corporate guarantee. At the time PIUDCL had experienced severe financial stress and failed to maintain its repayment schedules leading to the loan accounts classified as non performing assets.The Respondent J&K bank filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal, Mumbai ‘NCLT’ seeking recovery of the outstanding financial debt against EIL the corporate debtor. The NCLT found the existence of debt and default, passed an order admitting the Section 7 application dated 28.08.2024, appointing an Interim Resolution Professional and declaring a moratorium under Section 14 of the Insolvency and Bankruptcy Code,2016.
The appellant preferred an appeal before the National Company Law Appellate Tribunal ‘NCLAT’ in Company Appeal (AT) (Insolvency) No. 1808 of 2024. The Appellant contended that the NCLT failed to consider that EIL’s liabilities had been transferred to another company due demerger and a subsequent amalgamation, and a renewed sanction letter dated 18.11.2017 did not mention the guarantee therefore the guarantee was deemed to have been relinquished.
The NCLAT has dismissed the appeal order dated 11.09.2025, and confirmed the observations of the NCLT that while it is not disputed that there were internal adjustment by the ESSL group by way of demerger/ merger/ amalgamation, it has no effect as the liability of the corporate guarantor is concerned because it has been mentioned in clause 8 of the guarantee deed, that guarantee will not be determined on event of absorption/ amalgamation of corporate debtor with any other company.
Aggrieved by the decision, Ms. Madhavi Divan senior counsel appeared for the appellant. It was pointed out that the citations/ judgments relied upon by the NCLT to arrive at the impugned findings as referred by the NCLAT in paragraph 12 of its opinion, are fake and non-existent, probably AI-generated and are wrongly attributed to genuine citations, even where case citations are accurate like Clause 8: “this guarantee shall not be determined and not in any way prejudiced by any absorption or by any amalgamation of the guarantor company with any other company, shall incur and be available to the bank till such time the loan accounts of the borrower company is adjusted in the books of accounts of the bank”.
The excerpted paragraphs from the judgments are not traceable in law reports.
Issues Involved
The main issue before the Supreme Court of India is how did the fake non-existent judgments escape scrutiny by the first statutory appellate tribunal? The affidavit filed by the respondent, J&K bank, indicated that the judgments relied on by the NCLT were not cited by its counsel at the bar and the so-called precedents relied on by the adjudicating authority were obtained through its own research.
Legal provisions applied
The Supreme Court made it crystal clear that it has zero tolerance for producing, citing or, using AI-generated precedents without verification. It Is a serious lapse if a judge relies on such fake or hallucinated AI-generated material as precedents in support of a determination. It would violate the sanctity of adjudication to have such material influence, directly or indirectly, the decision-making process.
There is zero tolerance for the Bar or the Bench to cite, refer to, or especially rely on these materials, the Supreme Court declared. It is also clarified that this does not include the rightful use of AI, because the mere declaration of prohibitory action is not sufficient; but there must be accountability and consequences. As for the responsibility of the Bar Council of India, it should constitute a committee and deliberate on this issue if the members of the bar were submitting such fake and hallucinated material before the Court as if they are precedents of law. It is misconduct on the part of an advocate to cite such judgments without verifying them beforehand.
Reasoning of the court
An independent examination undertaken by the Supreme Court revealed about the judgments relied upon by the NCLT State Bank of India v. M/s Shree Ram Urban Infrastructure Ltd., 2020 SCC OnLine SC 341 (cited in para 44 of NCLT judgment) – Wrong citation of an existing reported judgment 6 and a non-existent paragraph, Everest Kento Cylinders Ltd. v. Union of India (2015) 2 SCC 1 (cited in para 45 of NCLT judgment) – Correct citation but non-existent paragraph, ICICI Bank Ltd. v. Urban Infrastructure Real Estate Ltd. (2019) 16 SCC 528 (cited in para 47 of NCLT judgment) – Non-existent citation, V.S. Dempo & Co. Ltd. v. Reliance Communications Ltd., (2021) 10 SCC 176 (cited in para 49 of NCLT judgment) –Non-existent citation, Canara Bank v. N.G. Subbaraya Setty & Anr., (2018) 16 SCC 228 (cited in para 51 of NCLT judgment) – Correct citation but 6 Correct cause title for the cited judgment is M. Subramaniam v. S. Janaki, (2020) 16 SCC 728; 2020 SCC OnLine SC 341. Non-existent paragraph and Sarbjit Singh v. Union Bank of India, (2022) 7 SCC 464 (cited in para 53 of NCLT judgment) –Non-existent citation.
The Supreme Court upheld that a decision of a court or an adjudicating authority based on material which is fake and hallucinated is no decision at all and it amounts to subversion of the rule of law.
Judgment
The Supreme Court did the following:
The judgments and orders passed by the NCLT and the NCLAT dated 28.08.2024 and 11.09.2025 set aside.
The Section 7 application RCP (IB) 6/MB/2023, was restored to its original number.
The NCLT shall proceed with the application of Section 7 and the Supreme Court made it clear that it did not express any opinion on the merits of the case.
The adjudicating authority should consider the facts and circumstances of the case to decide the case on its own merits.
The fact that Section 7 application was filed long back it was directed that the adjudicating authority shall take up and dispose of the said application preferably within two weeks from the day of the Supreme Court’s order and pending the disposal of the Section 7 application the parties were directed to maintain the status quo.
The appeal was disposed of in the terms above. Pending IAs, if any, are disposed of accordingly.
THIS ARTICLE IS WRITTEN BY AMAL SHALABY COLLEGE FROM FACULTY OF LAW PORT SAID UNIVERSITY
Bibliography
Primary Sources
Pooja Ramesh Singh v. Jammu and Kashmir Bank Ltd. 2026 INSC 668
Secondary Sources
‘Pooja Ramesh Singh v. Jammu and Kashmir Bank Ltd.’ (indiankanoon) https://indiankanoon.org/doc/113338666/
