Authority: Supreme Court of India (Civil Appellate Jurisdiction)
Order Date: 02 July 2026
Case Overview
- Parties: Appellant – Pooja Ramesh Singh (suspended director of Essel Infraprojects Ltd); Respondents – Jammu and Kashmir Bank Ltd and others.
- Background: PIUDCL obtained loan facilities from Jammu & Kashmir Bank Ltd, secured by a corporate guarantee executed by Essel Infraprojects Ltd (EIL). PIUDCL defaulted, leading the bank to file a Section 7 application before the NCLT seeking initiation of corporate insolvency resolution against EIL.
- Procedural History: NCLT admitted the application on 28‑08‑2024, appointing an Interim Resolution Professional and imposing a moratorium. The appellant appealed to NCLAT (AT Insolvency No. 1808‑2024), arguing that a demerger/amalgamation had transferred liabilities and that a renewed sanction letter omitted the guarantee.
- NCLAT Decision: On 11‑09‑2025, NCLAT dismissed the appeal, relying on several Supreme Court judgments (State Bank of India v Shree Ram Urban Infrastructure, Everest Kento Cylinders v Union of India, etc.) to affirm that the guarantee survived any amalgamation.
- AI‑Generated Citations Issue: Senior counsel Madhavi Divan highlighted that the judgments cited by the NCLT (and adopted by NCLAT) were non‑existent, likely fabricated by artificial intelligence. An independent examination confirmed that many cited paragraphs were either absent or incorrectly attributed.
- Judicial Concern: The Supreme Court observed that reliance on fabricated AI‑generated precedents contaminates the judicial process, equating it to a “catastrophic” breach of the rule of law. It declared zero tolerance for advocates or judges citing unverified AI material.
- Regulatory Direction: The Court directed the Bar Council of India to constitute a committee to formulate guidelines preventing lawyers from submitting fabricated AI citations and to prescribe disciplinary measures for violations.
Final Outcome
- The Supreme Court set aside the NCLT order dated 28‑08‑2024 and the NCLAT judgment dated 11‑09‑2025.
- The Section 7 application (RCP (IB) 6/MB/2023) is restored to its original number and the NCLT is instructed to proceed with it.
- The NCLT must dispose of the application within two weeks of this order and maintain the status quo pending disposal.
- No substantive view on the merits of the insolvency claim was expressed; the matter is left to the adjudicating authority.
Topics: Artificial Intelligence, Insolvency Law