Warning that ‘assistance can never be substituted for adjudication’, the Supreme Court has ruled that any adjudicatory order that relies on fake or hallucinated AI-generated material as precedent is no decision in the eyes of the law and must be set aside, even if such material had only an indirect bearing on the decision-making process. The Court reiterated that zero-tolerance rule applies equally to the Bar and the Bench.
Holding that reliance placed by the Customs Department (second respondent) on dubious AI-generated material proved fatal to the sustainability of the penalty order, the Apex Court set aside the impugned order of the High Court which confirmed the penalty, and directed revival of the proceedings against the appellant to be decided afresh by an officer of the same rank, other than the one who had passed the original order.
A Two-Judge Bench comprising Justice Dipankar Datta and Justice Sheel Nagu undertook the effort to individually verify the appellant’s contention. Upon verification, the Court found that the second respondent had relied upon case laws that were either non-existent or carried fake citations. Further investigation revealed that even where the cited case laws did exist, they did not lay down the ratio that was deduced from them, indicating what appeared to be a hallucination of AI.
The Court placed reliance on its earlier decision in Pooja Ramesh Singh v. Jammu & Kashmir Bank Ltd. [2026 SCC OnLine SC 1258], which had laid down a zero-tolerance policy for citing or relying on AI-generated precedents without verification. The Court also noted that it had recently released draft Regulations for Use of Artificial Intelligence in Courts, 2026, inviting comments and suggestions. While acknowledging that AI could serve as an assistive tool to speed up decision-making, the Court cautioned that assistance can never be a substitute for adjudication, observing that AI may well serve as training wheels, but entrusting it with the pilot’s seat would be both imprudent and dangerous.
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Briefly, the Additional Commissioner of Customs, Surat passed an Order-in-Original imposing a penalty of Rs. 425.27 crores on Vijay Ghanshyam Gadiya under Section 114 of the Customs Act, 1962. The penalty was triggered by the appellant’s alleged mis-declaration of a consignment of natural diamonds as lab-grown diamonds to attract a lower customs tariff. The appellant challenged the penalty before the High Court of Gujarat, but his appeal was dismissed.
