Signal India Supreme Court sets aside NCLT/NCLAT orders based on AI-generated fake legal precedents; RBI frontier-AI cyber risk directive

Summary

On July 2, 2026, India's Supreme Court set aside NCLT and NCLAT orders founded on AI-generated fake legal precedents in Pooja Ramesh Singh v. Jammu and Kashmir Bank Ltd. (2026 INSC 668), after finding that cited cases — including a fabricated "ICICI Bank Ltd vs Urban Infrastructure Real Estate Ltd" and "Sarbjit Singh vs Union Bank of India" — did not exist. The case arose from a Section 7 insolvency application J&K Bank filed against Essel Infraprojects Ltd. as corporate guarantor after Pan India Utilities Distribution Company Ltd. defaulted on its loan; the bench of Justices P.S. Narasimha and Alok Aradhe restored the application to its original number and ordered the NCLT to reprocess it. The bench likened the use of AI-hallucinated precedents to the release of "methyl isocyanide within the province of law and justice... invisible, insidious and catastrophic," an explicit reference to the 1984 Bhopal gas disaster, and directed the Bar Council of India to form a committee to address lawyers submitting fabricated AI-generated citations. The Court stated it was not rejecting AI's use in adjudication altogether, affirming a resolve to adopt AI technology in aid of adjudication while asserting total human control over adjudications at every stage. Separately, the Reserve Bank of India required banks to submit board-approved frontier AI cyber risk gap assessments by June 30, 2026, released draft model risk management guidelines on June 24, 2026, and RBI Deputy Governor Swaminathan Janakiraman said on June 5 that "Mythos-class models were engaging the government at both the RBI and inter-regulatory forum levels."