KUALA LUMPUR — Rail contractor Emrail Sdn Bhd has suffered a double setback after the High Court dismissed its RM59.1 million lawsuit against Kuwait Finance House (M) Bhd (KFH) over a disputed performance bond for the Light Rail Transit 3 (LRT3) project.
The court also allowed KFH’s counterclaim in full, ordering Emrail and three personal guarantors to jointly and severally pay the bank RM39.09 million in outstanding financing debt, FMT reported.
Justice Quay Chew Soon dismissed Emrail’s claim entirely, ruling that KFH was not contractually obligated to issue a performance bond based on the format prescribed by MRCB George Kent Sdn Bhd (MRCBGK), the project delivery partner (PDP) for LRT3.
The three guarantors named in the judgment were corporate figures Zaki Azmi, Hari Narayanan Govindasamy, and his son Amrish.
The dispute centred on whether KFH had agreed to provide a Kafalah bank guarantee that strictly followed the performance bond template required by MRCBGK.
In his 63-page judgment delivered today, Quay said the key issue was not the requirements of the project employer, but the terms agreed between Emrail and the bank.
“The central question underlying the plaintiffs’ claim is not what the employer wanted, but what the defendant (KFH) agreed to do,” he said.
The judge said the Islamic financing facility signed between Emrail and KFH expressly stated that the Kafalah bank guarantee had to be in a form and addressed to parties acceptable to the bank.
This, he said, gave KFH the contractual discretion to determine whether the wording and structure of the requested bond met its requirements.
The court also found that the performance bond template relied upon by Emrail was never incorporated into the financing agreement with KFH.
Quay said Emrail could not rely on its separate construction contract with MRCBGK to impose obligations on KFH, which was not a party to that agreement.
“The plaintiffs have conflated Emrail’s contract with its employer/PDP and its financing contract with the defendant,” he said.
The judge further rejected Emrail’s argument that KFH had acted negligently by failing to issue a compliant performance bond.
He ruled that negligence could not be used to obtain more favourable commercial terms than those agreed under the financing contract.
On Emrail’s claim that the absence of a compliant bond resulted in RM59.1 million in interim project payments being withheld, Quay said the contractor failed to prove a direct link between the alleged breach and the losses claimed.
The court found there was no evidence that MRCBGK would have certified or released the disputed payments had the bond been issued in the requested format.
The judge also noted that other LRT3 contractors had faced payment arrears, while Emrail itself eventually received about RM402.5 million under a subsequent contract related to the rail project.
On KFH’s counterclaim, Quay ruled that the financing facility had expired on Oct 31, 2021, leaving an outstanding balance of RM39,089,705.42 as of May 16, 2025.
The court ordered Emrail and the guarantors to settle the amount within one month, together with post-judgment interest of 5 per cent per annum from the date of judgment until full payment.
KFH was also awarded RM100,000 in legal costs.
Lawyers S. Shaarvin Raaj, A. Anusha, K. Ravvenneah, J. Jeyakrishna and Iman Nur Alya represented Emrail and the guarantors.
Counsel Syed Faisal Al-Edros Syed Abdullah, Mohd Wafiy Azman, Choo Shi Jin, Nasbal Harun, Ahmad Iqbal Rohaizan and Wardah Yunus acted for KFH. – September 24, 2026