TaxTMI 
TaxTMI 
2026 (7) TMI 174
X X X X Extracts X X X X
X X X X Extracts X X X X
....its processes. More than the inevitable consequence of setting aside such judgments, what is significant for our decision-making is our resolve to adopt AI technology in aid of adjudication, while at the same time asserting and declaring total and absolute control over adjudication, with a human in the loop at every stage. 2. Artificial Intelligence has acquired the capability to better, if not fully substitute, human effort, both routine and intellectual. This extraordinary capability, amid increased workloads of modern life, is compelling professionals to adapt and employ AI for intelligent, efficient and swift functioning. The Solicitors Regulation Authority (SRA), a body created under the United Kingdom Legal Services Act 2007^1, approved in 2025, the first purely Artificial Intelligence-driven law firm named Garfield Law Limited (GLA), to provide regulated legal services^2. Further, that AI law firm (GLA) is now reported to have successfully navigated the legal system, securing a county court decree in a suit for recovery of unpaid fee^3. The result can be gratifying, even inspiring; yet if left unregulated, Artificial Intelligence may infiltrate our intellectual work....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons. We are also aware that the process has commenced, the Regulations are being deliberated, and they will be notified after due process and in due course. The real success is, however, not in the making of the Rule or Regulation, but to be found in the power of the will of the Bar as well as the Bench, to harness this science and apply it with care and caution. No other facet of law and its practice has ever demanded a higher and deeper corroboration and coordination between the Bar and the Bench than the need to identify, decide, and apply AI to adjudication and the determination of disputes. 6. At the same time, it is necessary to clarify the position of law regarding a certain trait in AI's responses, a tendency to generate non-existent, fake, or hallucinated results when replying to a prompt. We are neither concerned with the cause nor with the process of resolving such hallucinations; it is for the engineers and scientists to deal with them. For us, i.e., for those in the province of adjudication and determination of disputes, this by-product of AI, i.e., the production of fake, non-existent, and hallucinated material and its utilisation as precedents in law, is like the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....credit facilities, a corporate guarantee was executed by EIL. In due course, PIUDCL experienced severe financial stress and failed to maintain its repayment schedules, leading to the classification of its loan accounts as non-performing assets. 11. Following continuous defaults, Respondent No. 1 filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, before the National Company Law Tribunal, Mumbai, seeking initiation of the corporate insolvency resolution process against the EIL/corporate debtor for recovery of its outstanding financial debt. 12. The National Company Law Tribunal examined the submissions and, upon finding the existence of debt and default, passed an order dated 28.08.2024 admitting the Section 7 application, appointing an Interim Resolution Professional, and declaring a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016. Aggrieved by the admission order, the appellant preferred an appeal before the National Company Law Appellate Tribunal in Company Appeal (AT) (Insolvency) No. 1808 of 2024. Before the appellate tribunal, the appellant contended that the NCLT erred by failing to consider that its liabilities had ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aring for the respondents have countered the submissions on merits. 15. It is not in dispute that the judgments relied upon by the NCLT are non-existent, and some AI-generated paragraphs are wrongly attributed to genuine citations. An independent examination undertaken by us reveals the following about the judgments relied upon by the adjudicating authority: State Bank of India v. M/s Shree Ram Urban Infrastructure Ltd., 2020 SCC OnLine SC 341 (cited in para 44 of NCLT judgment) - Wrong citation of an existing reported judgment [Correct cause title for the cited judgment is M. Subramaniam v. S. Janaki, (2020) 16 SCC 728; 2020 SCC OnLine SC 341.] and a non-existent paragraph, Everest Kento Cylinders Ltd. v. Union of India (2015) 2 SCC 1 (cited in para 45 of NCLT judgment) - Correct citation but nonexistent paragraph, ICICI Bank Ltd. v. Urban Infrastructure Real Estate Ltd., (2019) 16 SCC 528 (cited in para 47 of NCLT judgment) - Non-existent citation, V.S. Dempo & Co. Ltd. v. Reliance Communications Ltd., (2021) 10 SCC 176 (cited in para 49 of NCLT judgment) - Nonexistent citation, Canara Bank v. N.G. Subbaraya Setty & Anr., (2018) 16 SCC 228 (cited in para 51 of NCLT judgment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ective deterrent and discouraging professional misconduct by solicitors. A range of sanctions is available to the SRA, including prosecuting more severe cases at the Solicitors Disciplinary Tribunal. 2. SRA approves first AI-driven law firm (Solicitors Regulation Authority, 2025) . As per SRA News Bulletin, Garfield Law was approved after checking its compliance on various parameters. The bulletin indicated:- "Before authorising Garfield Law, we engaged with the owners to consider the firm's processes and assure ourselves that our rules can be met by an AI service. For instance, we have sought reassurance that there are appropriate processes in place to quality-check work, keep client information confidential, and safeguard against conflicts of interests. We have also checked the firm is managing the risk of 'AI hallucinations.' The system will not be able to propose relevant case law, which is a high-risk area for large language model machine learning. Garfield is not autonomous and will only take a step where the client has approved it, and furthermore there are supervision and monitoring processes in place. This includes greater oversight of claims in the in....