KUALA LUMPUR, Sept 24 — In a double courtroom defeat for rail contractor Emrail Sdn Bhd, the High Court has dismissed its RM59.1 million lawsuit against Kuwait Finance House (M) Bhd (KFH) and ordered the company alongside three personal guarantors to pay the bank RM39.09 million.

Justice Quay Chew Soon dismissed Emrail's claim over a disputed performance bond for the Light Rail Transit 3 (LRT3) development in its entirety and allowed KFH’s counterclaim in full, holding the contractor and its guarantors jointly and severally liable for the outstanding debt, FMT reported.

The three personal guarantors ordered to satisfy the judgment debt are prominent corporate figures Zaki Azmi, Hari Narayanan Govindasamy, and his son, Amrish.

The litigation turned on whether KFH was contractually bound to issue a performance bond conforming strictly to the template prescribed by MRCB George Kent Sdn Bhd (MRCBGK), the project delivery partner (PDP) for the LRT3 project.

“The central question underlying the plaintiffs’ claim is not what the employer wanted, but what the defendant (KFH) agreed to do,” Quay ruled in his judgment issued today.

The judge held that the underlying Islamic financing facility expressly stipulated that the Kafalah bank guarantee had to be in a form, and addressed to parties, acceptable to KFH. This contractual term gave KFH unfettered discretion to decide whether the wording and structure of the requested bond were acceptable.

The court further established that the specific performance bond template required by Emrail was never incorporated into the financing agreement with KFH.

Quay ruled that Emrail could not rely on its independent construction contract with MRCBGK to enforce obligations against 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 court also rejected Emrail’s argument that KFH had acted negligently by failing to issue a compliant bond, ruling that a claimant cannot use the tort of negligence to extract a more favourable commercial bargain than what was negotiated under contract.

On Emrail’s claim that the lack of a compliant bond caused RM59.1 million in interim project payments to be withheld, the judge found that the contractor failed to establish causation. The court noted that Emrail offered no proof that MRCBGK would have certified or released the sums, observing that other LRT3 contractors faced industry-wide payment arrears, with Emrail itself eventually receiving around RM402.5 million under a subsequent contract for the rail project.

Ruling on KFH’s counterclaim, Quay held that the financing facility expired on Oct 31, 2021, leaving an outstanding debt of RM39,089,705.42 as of May 16, 2025.

The court ordered Emrail and the guarantors to settle the sum within one month, alongside post-judgment interest at 5 per cent per annum from the date of the decision until full settlement, and awarded KFH 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.