From courtroom to boardroom: Supreme Court draft sets tone for India’s AI rules

When the Supreme Court of India released its draft AI regulations on 3 June 2026, the focus was on the judiciary's use of artificial intelligence, particularly concerns around fabricated legal citations and errors generated by AI tools. However, the draft's significance extends beyond courtrooms. As businesses increasingly deploy AI across functions ranging from customer service to content creation, the document may provide important clues about the direction of India's broader AI governance regime.

The regulations were prompted by a series of real-world failures. In February 2025, an Income Tax Appellate Tribunal order in Bengaluru was withdrawn after it relied on AI-generated judicial precedents that did not exist. A Karnataka High Court civil order similarly cited Supreme Court and Delhi High Court judgments that were never delivered. In March 2026, the Supreme Court heard allegations of fabricated citations in insolvency proceedings involving Essel Infraprojects. Together, these incidents highlighted the risks of AI-generated misinformation entering legal processes, prompting the judiciary to introduce a framework centred on accountability and human oversight.

The Supreme Court has ruled that judicial functions such as bail, sentencing, outcome prediction and witness credibility assessment must remain entirely human-led. Although the guidelines are aimed at courts, the principle extends beyond the legal system. Brands, advertisers and technology platforms are increasingly relying on AI for behavioural prediction, automated decision-making and content targeting-the very areas where the Court has emphasised the need for human oversight and accountability.

Read On: From clicks to conversations: AI is rewriting the rules of consumer commerce

The Accountability Shift That Industry Cannot Ignore

Ankit Sahni, Partner at Ajay Sahni and Associates, notes, "This is a clear shift from asking what AI can do to asking who remains accountable when AI is used. That shift will not remain confined to courts. The most exposed sectors are those using AI at scale to influence rights."

That framing extends beyond legal proceedings. In the adtech ecosystem, programmatic advertising platforms make millions of automated decisions every minute about which consumer sees which message, at what price and in what context. These systems rely on behavioural data, predictive modelling and audience profiling. Structurally, they are not dissimilar to the risk-scoring and behavioural prediction tools that the Supreme Court has flagged in judicial use cases, particularly where opacity and accountability are concerns.

Alay Razvi, Managing Partner at Accord Juris, identifies advertising and media, specifically AI-generated content and programmatic decisions, alongside healthcare, finance and hiring, as among the sectors most exposed to the regulatory direction set out by the judiciary. "The judiciary's framework effectively sets a de facto standard for algorithmic accountability," he says, "forcing these industries to implement human review, audit trails, and disclosure mechanisms before regulatory enforcement intensifies."

India does not yet have a comprehensive AI liability law. However, the Supreme Court’s draft, by setting out requirements such as explainability, bias testing, annual audits and restrictions on black-box systems in high-stakes decisions, is laying the groundwork for what legal experts describe as a reasonable care standard.

Read On: Agencies are going AI-native. Are brands buying in?

Disclosure as the Next Brand Currency

The draft regulations require any AI-generated content submitted to a court to be clearly identified, verified, and not presented as independent evidence without disclosure of its origin. The implications for the advertising and content industry are immediate.

Probir Roy Chowdhury, Partner at JSA Advocates and Solicitors, captures the consumer-facing dimension well. "Consumers are becoming more aware that they are interacting with AI-generated content, AI-backed customer support and automated decision-making systems. That is why transparency is increasingly becoming a trust and confidence issue now more than ever before."

Legal observers increasingly draw parallels with privacy disclosures under the General Data Protection Regulation and influencer disclosure norms that reshaped the creator economy. Razvi notes that mandatory AI disclosure is likely to evolve into both a compliance requirement and a competitive differentiator. "Research indicates consumers trust organisations more when AI usage is disclosed transparently. As awareness grows, undisclosed AI use may erode brand credibility, especially in sensitive sectors like healthcare, finance, and hiring," he says.

Sahni frames it as a brand opportunity as much as a regulatory obligation. "AI disclosure could well become the next major trust signal. Just as consumers now expect privacy notices, influencer disclosures and sponsored-content labels, they may increasingly expect to know when content, recommendations or interactions are AI-generated or AI-assisted. In the long run, transparent AI use may become a brand differentiator, not merely a compliance requirement."

For brands investing in AI-powered chatbots, automated content pipelines and personalised recommendation engines, this is a signal worth taking seriously ahead of any formal mandate.

The Governance Gap That Brands Must Now Fill

Arun Prabhu, Partner and Co-Head of Digital and TMT practice at Cyril Amarchand Mangaldas, notes that the framework's blueprint can extend to other, less sensitive spaces. He describes the Court's approach as a conscious choice of innovation over restraint, adding that the narrow definition of what is prohibited, essentially opaqueness, profiling and risk scoring without oversight, is designed to enable widespread AI use rather than restrict it. The Court, he argues, has prescribed reasonable and sensible guardrails for high-impact AI use cases, not blanket bans.

Sahni's counsel to businesses is direct. "If the Supreme Court is saying that even courts must use AI with human oversight, businesses should be careful about treating AI as an unchecked replacement for human responsibility. Automated customer interactions, content creation and media targeting can create legal and reputational risk if they are inaccurate, biased, misleading or insensitive. AI can scale execution, but accountability must remain human."

Roy Chowdhury reinforces the direction of travel. "The message is not that AI should not be used; it is that accountability should not be diluted. When something goes wrong, regulators, courts and consumers will look to the brand, not the AI tool, for accountability."

The Supreme Court’s framework requires AI systems used in courts to undergo technical, ethical, accuracy, bias, explainability, privacy and cybersecurity assessments before approval. It also proposes annual audits, continuous monitoring and grievance mechanisms for parties who believe they have been harmed by AI.

None of this currently applies to brands running programmatic campaigns or using generative AI for customer engagement. But legal observers are increasingly asking how long that gap will remain.

The draft remains open for public comment until 20 June.