Supreme Court Says Citing AI-Fabricated Case Law Is Misconduct

Welcome to this week’s issue of the Indian Legal Brief (ILB). Here are the judgments, orders, regulatory changes, and developments that matter to your practice — without the noise.

The Supreme Court is still in its partial-working-days regime until July 13, but its vacation benches delivered an unusually substantive run of judgments this week — led by a first-of-its-kind ruling that treats citing AI-hallucinated case law as professional misconduct and asks the Bar Council of India to write the rulebook. Justices Sanjay Karol and N. Kotiswar Singh added three clean procedural authorities in a single sitting, on compromise decrees, committal in complaint cases, and municipal-election affidavits. Off the constitutional beat, a Delhi Sessions court rejected fresh bail pleas by Umar Khalid and Sharjeel Imam, Karnataka refused to freeze its gig-workers welfare levy, the NCLAT unwound an insolvency admission that never crossed the ₹1-crore threshold, and West Bengal recast its OBC list. Here’s what happened.

Supreme Court Highlights

SC Sets Aside Tribunal Orders Built on AI-Invented Precedents, and Makes Citing Fake Case Law Misconduct

Bench: Justices P.S. Narasimha and Alok Aradhe — July 2, 2026

In the most consequential judgment of the week, the Supreme Court on July 2 set aside orders of the NCLT and the NCLAT that had admitted insolvency proceedings by the Jammu and Kashmir Bank against Essel Infraprojects Ltd over a claimed default of ₹87.43 crore — because both forums had relied on six non-existent, AI-generated “precedents” to reach their conclusions (Pooja Ramesh Singh v. Jammu and Kashmir Bank Ltd, 2026 LiveLaw (SC) 653). A bench of Justices P.S. Narasimha and Alok Aradhe treated the intrusion of fabricated citations into a judicial order as a structural threat to adjudication, not a stray drafting error.

This by-product of AI — the production of fake, non-existing and hallucinated material and its utilization as precedence in law — is like the release of methyl isocyanide in the province of law and justice: invisibly insidious, and catastrophic by the time anyone notices.

The Court laid down a zero-tolerance rule. Citing AI-generated judgments without verification is professional misconduct for an advocate; and where a decision rests on fake or hallucinated material, it must be set aside even if only “an iota” of that material entered the reasoning — regardless of whether the fabricated citation had a direct or indirect bearing on the outcome. It directed the Bar Council of India to constitute an expert committee to examine the use of artificial intelligence in adjudication and to frame guiding principles, backed by disciplinary consequences, to prevent a recurrence.

Why it matters: This is the Supreme Court’s first square pronouncement that AI-hallucinated citations are not a technology curiosity but a professional-conduct problem — and it puts the verification burden squarely on the advocate who files them. Every litigator now has a citable authority (and a live misconduct risk) requiring that each judgment relied on be checked against a genuine reporter or the court’s own record before it goes into a pleading. The “iota” standard is deliberately unforgiving: a single fabricated citation can sink an otherwise sound order on appeal, so the practical takeaway is to audit AI-assisted drafts line by line and to watch for the Bar Council norms the Court has now mandated.

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Advocate Cannot Compromise a Client’s Rights Without Express Authorisation — Krishna Kumar Ojha v. Jitendra Chaudhary

Bench: Justices Sanjay Karol and N. Kotiswar Singh — July 1, 2026

On July 1, the Supreme Court upheld the setting aside of a 1994 compromise decree in a partition suit, holding that a compromise recorded under Order XXIII Rule 3 of the Code of Civil Procedure is unsustainable where it lacks the party’s signature or the advocate’s express authorisation to settle (Krishna Kumar Ojha v. Jitendra Chaudhary, 2026 INSC 662). The bench of Justices Sanjay Karol and N. Kotiswar Singh confirmed that a general vakalatnama does not, by itself, empower counsel to surrender a client’s substantive rights.

Unless there is an express authorisation by the client, an advocate is not empowered to enter into a compromise on behalf of the client.

Because the “voluntary” element mandated by Order XXIII Rule 3 was not established, the Court dismissed the appeal and directed that the partition suit be adjudicated on its merits through a full trial.

Why it matters: A crisp reminder of the boundary of an advocate’s implied authority. Counsel who record settlements should ensure the compromise is signed by the parties or backed by specific written authority to compromise — a routine vakalatnama will not cover the surrender of property or other substantive rights, and a decree taken without it remains vulnerable to being reopened years later. For litigators, it is also a caution on the durability of consent terms: an under-documented compromise buys finality only on paper.

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Magistrate Need Not Record Pre-Charge Evidence Before Committing a Sessions-Triable Complaint — Neeraj Gupta v. Pardeep Kumar Bansal

Bench: Justices Sanjay Karol and N. Kotiswar Singh — July 1, 2026

The same bench clarified a recurring procedural question in complaint cases: when the offences alleged are exclusively triable by a Court of Session, the Magistrate is not required to record the complainant’s pre-charge evidence under Section 244 CrPC before committing the case under Section 209 (Neeraj Gupta v. Pardeep Kumar Bansal, 2026 INSC 660). Section 244, the Court held, belongs to the warrant-trial procedure a Magistrate follows when trying the case himself — not to the committal exercise, where his role is to pass the matter on to the Sessions Court.

The Court read Sections 200–204, 209 and 244 together to hold that once a Magistrate takes cognizance of a complaint disclosing a Sessions-triable offence, the proper course is to commit — not to embark on a mini-trial of prosecution evidence first.

Why it matters: A practical timing point for anyone running or defending complaint cases in serious offences. Insisting on Section 244 evidence before committal is a common way to stall — this judgment closes that route and should shorten the road from cognizance to the Sessions Court. Prosecutors gain a clean answer to a delay tactic; defence counsel lose an interlocutory lever but gain certainty on where the evidentiary contest actually happens.

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Representation of the People Act Doesn’t Govern Municipal Polls — but Spouse’s Assets Must Still Be Disclosed

Bench: Justices Sanjay Karol and N. Kotiswar Singh — July 1, 2026

Rounding out its July 1 sitting, the bench held that the penal provisions of the Representation of the People Act, 1951 do not apply to municipal elections, which are governed by the relevant State municipal law — here, the Gujarat Municipalities Act and its election rules (Chandrikaben Kishor Dafda v. State of Gujarat, 2026 INSC 665). Where the municipal statute contains no penal provision for a false affidavit (Gujarat’s was omitted by a 1990 amendment), a candidate who files a false declaration can instead be prosecuted under the Indian Penal Code.

On the merits of disclosure, the Court read Rule 7A of the Gujarat rules to require a candidate to disclose the assets of herself, her spouse and her dependants — including agricultural land standing solely in the husband’s name. It also reaffirmed that taking cognizance under the wrong statutory provision is a curable defect: “cognizance is taken of the offence and not of the section.” The cognizance order under the RPA was set aside and the matter remanded to the Magistrate to proceed afresh under the correct law.

Why it matters: Two useful holdings for election-law and local-government practitioners. First, do not reach for the RPA’s penal machinery in municipal-poll disputes — locate the offence in the State municipal law or, failing that, the IPC. Second, asset-disclosure obligations in local-body affidavits extend to a spouse’s separately owned property, so “it’s in my husband’s name” is not a defence to non-disclosure. The curable-defect point also gives prosecutors room to salvage a case begun under the wrong provision, rather than see it collapse at the threshold.

Other Notable SC Orders This Week

• Status quo on ethanol allocation (June 30) — A vacation bench of Justices M.M. Sundresh and Sheel Nagu ordered status quo in BPCL’s SLP challenging a Karnataka High Court direction that oil-marketing companies reconsider ethanol supply allocation for the 2025–26 supply year, and listed the batch to be taken up after regular sittings resume on July 13.
• Notice on Sonam Raghuvanshi’s bail (July 3) — The same bench issued notice on the State of Meghalaya’s challenge to the High Court order upholding bail to Sonam Raghuvanshi in the Raja Raghuvanshi honeymoon-murder case, declined to disturb her release for now, and listed the matter for July 9. The trial court had granted bail after an arrest document cited “Section 403 BNS” instead of the murder provision, Section 103 — a reminder of how a drafting slip in the arrest memo can travel all the way up.

From the Courts

Delhi Sessions Court Rejects Umar Khalid and Sharjeel Imam’s Fresh Bail Pleas as Not Maintainable

Bench: Additional Sessions Judge Sameer Bajpai, Karkardooma Courts, Delhi — July 4, 2026

On July 4, a Delhi Sessions court dismissed the fresh regular-bail applications of Umar Khalid and Sharjeel Imam in the “larger conspiracy” case arising from the 2020 North-East Delhi riots, prosecuted under the Unlawful Activities (Prevention) Act. Additional Sessions Judge Sameer Bajpai held that the applications were not maintainable, reading the Supreme Court’s January 5, 2026 order as permitting a renewed bail plea only after the protected witnesses in the case are examined, or after one year from that order, whichever is earlier — a threshold not yet crossed.

The applicants had argued that circumstances had changed because, more than six months after the Supreme Court declined bail, arguments on charge remain incomplete and they have now spent close to six years in custody in this FIR. The court took the view that it was bound by the apex court’s conditions and could not independently entertain the pleas at this stage.

Why it matters: The order turns on maintainability rather than the merits of the accusations — the trial court read the Supreme Court’s calibrated liberty to re-apply as a gate that has not yet opened. For UAPA practitioners, it is a pointed illustration of how a conditional “liberty to renew” in a higher court’s order can itself foreclose a fresh bail attempt, and it keeps the spotlight on trial delay: the next realistic window depends on the examination of protected witnesses or the one-year mark. The parallel Supreme Court reference on clarifying the K.A. Najeeb / Section 43D(5) line remains the larger backdrop.

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Karnataka HC Refuses to Freeze the Gig-Workers Welfare Levy — Zomato, Swiggy and Zepto Must Deposit the Fee

Bench: Justice M. Nagaprasanna, Karnataka High Court — July 3, 2026

On July 3, the Karnataka High Court declined to stay the Karnataka Platform-Based Gig Workers (Social Security and Welfare) Act, 2025 in a challenge brought by the Internet and Mobile Association of India along with Eternal Ltd (Zomato and Blinkit), Swiggy, Zepto, Urban Company and others. Justice M. Nagaprasanna instead granted the platforms interim protection from coercive action, but directed them to deposit their second-quarter welfare fees with the court registry within three weeks — the levy is capped at 50 paise per two-wheeler ride, 75 paise for three-wheelers and ₹1 for four-wheelers, with a 1% charge on food and grocery deliveries.

Why fight over fifty paise?

The Court fixed July 30 for objections and posted the matter for further hearing on August 14, clarifying that the deposit is without prejudice to the constitutional challenge.

Why it matters: The deposit-into-registry route lets a welfare statute keep running while its validity is tested — a template courts increasingly use for levy-based social-security laws. For platform and employment-law counsel, the order signals that the aggregator welfare-fee model will not be frozen at the interim stage merely because the constitutional question is live; clients should budget for the levy and preserve their position on merits for the August hearing. Other States drafting gig-worker codes will read Karnataka’s interim approach closely.

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Allahabad HC Refuses to Quash a ‘Nikah Halala’ Rape FIR — Personal Law Can’t Shield a Crime

Bench: Justices J.J. Munir and Tarun Saxena, Allahabad High Court — July 3, 2026

A division bench of the Allahabad High Court on July 3 declined to quash an FIR against nine persons accused of sexually exploiting the complainant — first as a minor during a 2016 “nikah halala” and again as an adult during a second halala in 2025 — and vacated the interim protection earlier granted to the petitioners (Tayyab v. State of U.P., 2026 LiveLaw (AB) 345). The Court held that where the allegations disclose a cognizable offence, personal law cannot be pleaded as a bar to investigation.

When it comes to criminal law, unless the law itself makes an exception — which it rarely does — there is absolutely no place for pleading personal laws governing marriage, if, interlaced with a matrimonial relationship, a crime were committed.

The bench added that if, under the guise of halala, a minor girl is subjected to sexual intercourse, the POCSO Act is squarely attracted, and directed the investigation to proceed.

Why it matters: A clear statement that the framework of a religious or matrimonial practice does not immunise conduct that independently amounts to an offence — and that POCSO overrides personal-law framing where a minor is involved. For criminal practitioners, it narrows the space for Section 528 BNSS / 482 CrPC quashing petitions that lean on the consensual or religious character of a relationship, and reaffirms that the existence of a marriage is not, by itself, an answer to a sexual-offence FIR.

Other Notable High Court Orders

• Telangana HC presses the ECI on Telugu-only SIR forms (June 29) — On the June 29 listing, Justice B. Vijaysen Reddy declined interim relief but directed the Election Commission to consider the feasibility of providing enumeration forms in Urdu in constituencies where Urdu-knowing voters exceed 20%, and to place on record the languages in which SIR forms were distributed in West Bengal, Rajasthan and Bihar. The matter was posted for further hearing next week.
• Bombay HC seals the Justice Gautam Patel threat-probe reports (July 2) — Hearing the Bar bodies’ PIL on threats to the retired judge, the Court directed that the two status reports filed by the Mumbai Police and the Ministry of External Affairs (on steps taken via the High Commission in London) be kept in sealed cover and not made public, noted progress in the probe, and adjourned the matter to August 7.

Regulatory Watch

SEBI Rewrites the Rules for Handling Clients’ Unpaid Securities

Securities and Exchange Board of India — July 3, 2026

On July 3, SEBI amended Paragraph 46 of its Master Circular for Stock Brokers to overhaul how trading members deal with a client’s unpaid securities. Under the revised framework, securities in a pay-out will now flow directly into the client’s demat account and then be auto-pledged to a dedicated “Client Unpaid Securities Pledgee Account” (CUSPA), replacing the older client-unpaid-securities-account mechanism. Trading members must notify clients of the funds obligation by email and SMS, maintain a board-approved policy on handling unpaid securities, and act within a maximum window of five trading days from pay-out before invoking the pledge.

Implementation is staggered: the core auto-pledge, policy and invocation provisions take effect three months after the stock exchanges issue their operational guidelines, while the extension-related sub-paragraphs run on a fixed six-month timeline from the circular.

Why it matters: For brokers and their compliance teams, this is a workflow change, not just a drafting tweak — the CUSPA route, the mandatory client-notification trail and the five-day invocation clock all need to be built into back-office systems and client agreements before the exchange guidelines land. Securities-market counsel advising trading members should map the new obligations now and track the exchanges’ operational circulars, which start the three-month clock for the substantive provisions.

Insolvency & Corporate

NCLAT Unwinds Vikram Solar’s Insolvency — the Debt Never Crossed the ₹1-Crore Bar

Bench: NCLAT — June 29, 2026

On June 29, the NCLAT set aside the NCLT Kolkata order that had admitted Vikram Solar Ltd to insolvency on an operational creditor’s petition by Isitva Steels, on the short but decisive ground that the admitted operational debt — ₹91,98,556 — falls below the ₹1-crore minimum-default threshold prescribed by Section 4 of the Insolvency and Bankruptcy Code. Counsel for the operational creditor accepted that the debt was below the statutory floor, and both sides agreed the admission could not stand. The Tribunal quashed the admission, directed that the ₹91.98 lakh Vikram Solar had deposited under the June 24 interim order be refunded after verification, and left the parties free to pursue a settlement.

Why it matters: A clean reaffirmation that the ₹1-crore threshold under Section 4 is jurisdictional, not a matter of discretion — a Section 9 petition for a default below it is simply not maintainable, however genuine the dispute. For operational creditors, the lesson is to test the default against the threshold before filing; for corporate debtors facing admission over sub-threshold dues, this is the fastest exit in appeal. It also closes the loop on a matter ILB has been tracking since the interim stay two weeks ago.

Legislative Watch

West Bengal Recasts Its OBC List, Dropping 77 Communities and Trimming the Quota

West Bengal Legislative Assembly — June 30, 2026

On June 30, the West Bengal Assembly passed two Bills — the West Bengal Backward Classes (Other than SC and ST) (Reservation of Vacancies in Services and Posts) (Amendment) Bill, 2026 and the West Bengal Backward Classes Commission (Amendment) Bill, 2026 — recasting the State’s OBC reservation framework. The amendments remove 77 communities from the OBC list, retain 66, and reduce the OBC reservation in State services and posts from 10% to 7%. The government framed the exercise as compliance with the Calcutta High Court’s May 2024 judgment, which had set aside the earlier inclusion of those communities for failing to follow the prescribed procedure. The Bills were passed by 186 votes to 17.

Why it matters: The recast list is the legislative sequel to a court-ordered reset, and it is almost certain to be litigated in turn — both by communities dropped from the list and on the adequacy of the fresh classification exercise. For service-law and constitutional practitioners, it is a live example of a legislature legislating in the shadow of a High Court quashing, and the drafting will be scrutinised for whether it cures the procedural defects the Court identified or merely re-enacts the outcome. Expect writ challenges once appointments under the revised roster begin.

What We’re Watching Next Week

• The Court returns to full strength — Regular sittings resume July 13, and the parked cluster of larger-bench and constitution-bench matters — the Sabarimala nine-judge reference, the UAPA-bail reference, the Section 138 NI Act / IBC-moratorium and Section 392 CrPC references, and the NEET-UG 2026 challenges before Justice Narasimha’s bench — is expected to start moving from mid-July.
• AIIMS contempt — The AIIMS Acting Director’s personal appearance before the Supreme Court is set for July 7 in the contempt matter.
• Sonam Raghuvanshi and Anil Ambani — The Supreme Court hears Meghalaya’s bail challenge on July 9; the NCLAT takes up Anil Ambani’s personal-guarantor insolvency appeal on July 10.
• The Bar Council’s AI rulebook — Watch for the expert committee the Supreme Court directed the BCI to constitute on AI-generated citations, and the guiding principles and disciplinary framework it is asked to frame.
• Gig-workers and OBC challenges — Objections in the Karnataka gig-workers matter are due July 30 (hearing August 14), and West Bengal’s recast OBC list is likely to draw fresh writ petitions.

That’s all for this week. If a colleague would find this useful, forward them this page — or better yet, ask them to subscribe.