Supreme Court Says Alleged 'Hallucinated' Citations By NCLT-NCLAT In Essel Infraprojects Case Under Examination

The Supreme Court on Tuesday said allegations that the NCLT and NCLAT relied on allegedly fake citations in insolvency proceedings against Essel Infraprojects Ltd were already under administrative examination and had been referred to a committee.

The court also reserved judgment in the appeal filed by the company's suspended director.

A Bench of Justices P.S. Narasimha and Alok Aradhe made the observation while hearing the appeal filed by suspended director Pooja Ramesh Singh against orders admitting Essel Infraprojects Ltd. into the corporate insolvency resolution process.

“Leave about that judgment. We will ignore those judgments. On our administrative side, we are dealing with it. We have also taken note of that. We have referred to a Committee,” the Bench told Senior Advocate Madhavi Divan, appearing for Singh.

Divan argued that six judgments relied upon by the National Company Law Tribunal and later approved by the National Company Law Appellate Tribunal were either nonexistent or did not support the legal propositions attributed to them, undermining the reasoning in the insolvency orders.

She argued that the orders should be set aside as they could otherwise operate as precedents. Divan, however, clarified that the appellant also had an independent case on merits even without relying on the issue of the allegedly fake citations.

The bench said it would ignore those citations while deciding the appeal and asked Divan to proceed with arguments on merits, observing that the issue would have been different if the entire case depended solely on the disputed judgments.

The controversy first surfaced during the Supreme Court hearing on May 5, when the appellant informed the Court that the NCLT Mumbai had relied on what were described as “hallucinated” citations while admitting Essel Infraprojects Ltd into insolvency.

In an affidavit filed on May 11, Singh alleged that the NCLT and NCLAT relied on “non-existent” and “untraceable” judgments, including State Bank of India v. Shree Ram Urban Infrastructure Ltd., Everest Kento Cylinders Ltd. v. Union of India, ICICI Bank Ltd. v. Urban Infrastructure Real Estate Ltd., V.S. Dempo & Co. Ltd. v. Reliance Communications Ltd., Canara Bank v. N.G. Subbaraya Setty & Anr., and Sarbjit Singh v. Union Bank of India. According to the affidavit, the cited propositions could not be traced on recognised legal databases.

The insolvency dispute arose after Jammu and Kashmir Bank Ltd initiated proceedings against Essel Infraprojects Ltd as a corporate guarantor for loans granted to Pan India Utilities Distribution Company Ltd.

The bank claimed a default of more than ₹87.43 crore under a ₹200-crore credit facility sanctioned in December 2013. The facility was secured through a corporate guarantee and a mortgage over land at Gorai in Mumbai.

On August 28, 2024, the NCLT Mumbai admitted the insolvency plea, holding that the corporate guarantee continued despite restructuring of the borrowing entity.

On appeal by Singh, the NCLAT on September 11, 2025 upheld that order, holding that Clause 8 of the guarantee deed expressly stated that the guarantee would not be prejudiced by amalgamation or absorption of the guarantor company. It also found no evidence to show that the bank had discharged the guarantee.

For Petitioner: Senior Advocate Madhavi Divan, Advocates Smriti Churiwal, Atharva Kotval, Simran Shadija, Sonia Sharma, Jaiveer Kant, Meher Thapar, Vidisha Jain, Ridhima Lahariya, AOR Vishesh Vijay Kalra

For Respondent: Advocates Sumesh Dhawan, Rajdeep Panda, Sanjna Dua, Anjali Sharma, Mandeep Singh Vinaik, Deepak Bashta, AOR Shagun Matta, M/S Dua Associates, AOR.