AI-hallucinated judgments: Why Supreme Court set aside a tribunal order, Pg8

Key Highlights:

• The Supreme Court of India recently set aside an order by the National Company Law Tribunal (NCLT) after discovering it relied on six AI-hallucinated judgments.
• Three of the cited judgments were entirely non-existent, while the other three either misquoted passages or were used out of context.
• The case involved Essel Infraprojects Ltd., a corporate guarantor, against whom insolvency proceedings were initiated by Jammu and Kashmir Bank.
• Justices P. S. Narasimha and Alok Aradhe of the Supreme Court likened the use of such fake material to the release of methyl isocyanate, calling it "invisible, insidious, and catastrophic."

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Detailed Insights:

• The NCLT order, which rejected objections raised by Essel Infraprojects Ltd. against insolvency proceedings, was found to be based on fabricated legal precedents.
• The Supreme Court declared that a decision built on fabricated case law "is no decision at all" and must be set aside, even if "an iota of fake or hallucinated material enters the decision-making process."
• The court emphasized a "zero-tolerance" approach towards the production, citation, or use of AI-generated precedents without proper verification, deeming it professional misconduct for advocates and a serious judicial lapse for judges.
• The NCLT had cited non-existent cases like ICICI Bank Ltd v Urban Infrastructure Real Estate Ltd. and V S Dempo & Co Ltd v Reliance Communications Ltd. to support its reasoning.
• In other instances, genuine judgments such as Everest Kento Cylinders Ltd v Union of India and Canara Bank v N G Subbaraya Setty were cited, but with fabricated passages attributed to them.
• The Jammu and Kashmir Bank, the financial creditor, stated in an affidavit that it had not cited these judgments, suggesting the tribunal sourced them through its "own research."
• The Supreme Court acknowledged the potential of AI as an assistive tool but stressed that "human control over adjudication must remain total and absolute at every stage."

Key Concepts Involved:

• National Company Law Tribunal (NCLT): A quasi-judicial body in India established under the Companies Act, 2013, to adjudicate matters relating to company law and corporate insolvency.
• AI Hallucination: A phenomenon where an AI model generates false, inaccurate, or irrelevant information, presenting it as factual and convincing.
• Corporate Guarantee: A legally binding agreement where one corporate entity promises to fulfill the financial obligations of another entity (the principal debtor) to a creditor if the principal debtor defaults.
• Insolvency Proceedings: A legal process initiated when an individual or company is unable to repay their outstanding debts, aiming for resolution or liquidation under frameworks like the Insolvency and Bankruptcy Code, 2016.
• Methyl Isocyanate: A highly toxic chemical, infamously known for its leak during the Bhopal Gas Tragedy in 1984, causing widespread death and health issues.