Bench Criticises Advocate-on-Record for Shifting Blame to Clients; Dismisses Appeals Challenging Insolvency Proceedings Against Hotel Companies
Supreme Court Raises Concern Over AI Generated Fake Judgments
The Supreme Court expressed serious concern over AI Generated Fake Judgments in a legal compilation on Thursday, October 15. The controversy arose during insolvency appeals involving two hotel-operating companies.
A Division Bench comprising Justice Dipankar Datta and Justice Augustine George Masih examined the issue.
The respondents alleged that the appellants’ compilation contained several AI-generated judicial decisions that did not exist.
The Bench described the incident as undesirable and questioned the professional conduct of the legal team.
Moreover, the Court criticised the Advocate-on-Record (AoR) for attempting to shift responsibility onto the appellants.
Supreme Court Questions Advocate-on-Record’s Conduct
During the hearing, the Bench questioned the Advocate-on-Record about the disputed compilation.
However, the AoR reportedly claimed ignorance of its contents and attempted to blame the clients.
The Court strongly disapproved of this response.
The Bench recorded:
“According to them [the respondents], the compilation was replete with AI generated non-existent judgments. Advocate-on-Record for the appellants, facing the Court’s query, sought to shift the entire blame on the appellants while at the same time feigning ignorance of what the compilation contained.”
The Court highlighted the seriousness of presenting non-existent judicial precedents during legal proceedings.
Furthermore, the incident raised concerns about professional responsibility when lawyers rely on AI-assisted legal research.
Insolvency Dispute Involving Two Hotel Companies
The controversy emerged during civil appeals filed by suspended directors of two hotel-operating companies.
The companies involved were:
- GSTAAD Hotels Pvt. Ltd., which operates JW Marriott in Bengaluru.
- Neo Capricorn Plaza Pvt. Ltd., which operates Crowne Plaza in Pune.
Financial creditor Omkara Assets Reconstruction Pvt. Ltd. initiated Corporate Insolvency Resolution Process (CIRP) proceedings against the companies.
The proceedings followed defaults on debts originally extended by Piramal Finance.
Subsequently, the corporate debtors challenged the insolvency proceedings before the National Company Law Tribunal (NCLT).
They also pursued appeals before the National Company Law Appellate Tribunal (NCLAT).
However, both tribunals ruled against the corporate debtors.
The suspended directors then approached the Supreme Court through civil appeals.
NCLT Need Not Quantify Exact Outstanding Debt
The Supreme Court examined the legal challenge to the admission of the insolvency applications.
The appellants questioned the validity of the proceedings under the Insolvency and Bankruptcy Code (IBC).
However, the Bench upheld the concurrent decisions of the NCLT and NCLAT.
The Court clarified that the NCLT need not determine the precise outstanding liability before admitting an insolvency application.
Therefore, the absence of an exact quantification did not invalidate the admission of the insolvency proceedings.
The Bench dismissed the civil appeals on their merits.
Additionally, the Court directed that the CIRP against both companies continue in accordance with law.
Senior Counsel Tenders Unconditional Apology
The Court also considered the legal team’s conduct concerning the disputed compilation.
During the hearing, senior counsel appearing for the appellants accepted responsibility on behalf of the legal team.
The senior counsel then tendered an unconditional apology before the Bench.
Initially, the judges considered imposing exemplary monetary costs over the submission of non-existent judicial precedents.
However, the Bench ultimately decided against imposing costs.
The Court reached this decision after learning about the death of the first appellant, Deepak Raheja.
Consequently, the final order recorded “no order as to costs.”
Supreme Court Dismisses Insolvency Appeals
The Supreme Court dismissed the appeals challenging the insolvency proceedings against GSTAAD Hotels Pvt. Ltd. and Neo Capricorn Plaza Pvt. Ltd.
The Bench affirmed the decisions of the NCLT and NCLAT.
It also allowed the Corporate Insolvency Resolution Process against both companies to proceed under the IBC.
Meanwhile, the Court recorded its disapproval of the disputed legal compilation.
The judges also criticised the Advocate-on-Record’s attempt to shift responsibility onto the appellants.
AI-Generated Legal Citations Raise Professional Concerns
The incident highlights the risks of relying on unverified AI-generated legal research.
The Supreme Court’s observations draw attention to the responsibility of legal professionals to verify judicial precedents before presenting them in court.
In particular, the Bench expressed concern about AI Generated Fake Judgments appearing in formal legal submissions.
The proceedings also underscore the importance of professional accountability when counsel submit legal compilations.
Although the Court accepted the apology and refrained from imposing costs, it recorded its disapproval of the incident.
The ruling ultimately allowed the insolvency proceedings against both hotel-operating companies to continue.
