KFH wins RM39.1m judgement against Emrail, Zaki in LRT3 financing dispute
Islamic bank Kuwait Finance House (Malaysia) Bhd (KFH) has won a RM39.09 million judgement against railway contractor Emrail Sdn Bhd, former Chief Justice Tun Zaki Azmi, and two other guarantors after the High Court…
Source: theedgemalaysia.com · The Edge Malaysia · September 25, 2026 at 9:32 AM · AI-assisted report
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KUALA LUMPUR, 25 SEPTEMBER 2026 —
Islamic bank Kuwait Finance House (Malaysia) Bhd (KFH) has won a RM39.09 million judgement against railway contractor Emrail Sdn Bhd, former Chief Justice Tun Zaki Azmi, and two other guarantors after the High Court dismissed Emrail’s suit and upheld KFH’s counterclaim for outstanding financing.
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High Court judge Datuk Quay Chew Soon ruled that Emrail and its three joint guarantors—Zaki, Emrail shareholder Tan Sri Hari Narayanan Govindasamy, and Emrail CEO Amrish Hari Narayanan—must jointly and severally pay KFH RM39,089,705.42 by May 16, 2025. The court also awarded KFH interest at 5% per annum from the judgement date (Sept 24, 2026) and RM100,000 in legal costs.
The dispute stems from a RM783.16 million Light Rail Transit Line 3 (LRT3) contract awarded to Emrail by Prasarana Malaysia Bhd in November 2017. To fund the project, Emrail secured a RM320 million Islamic financing facility from KFH in January 2018, backed by personal guarantees from Zaki, Hari, and Amrish.
Emrail filed suit in December 2019, seeking RM59.1 million in special damages, RM7.9 million in expended costs, and general damages. The contractor alleged KFH had breached its agreement by failing to issue a performance bond in the exact format demanded by project delivery partner MRCB George Kent Sdn Bhd (MRCBGK), causing Prasarana to withhold interim payments.
Quay dismissed Emrail’s claims, ruling KFH was not obligated to comply with MRCBGK’s performance bond template. The judge stated that as the issuing financial institution, KFH retained the right to review the scope and wording of the instrument. He also noted that issuing the bond in the requested format would have violated Shariah law, as it referenced an agreement that had not been executed and dated.
The court further affirmed that the Islamic financing facility—structured as a Murabahah Tawarruq General Working Capital Financing and Kafalah Bank Guarantee—had expired on Oct 31, 2021, rendering the outstanding debt immediately due. Quay rejected Emrail’s argument that repayment was restricted to LRT3 contract proceeds, stating that the deed of assignment over contract proceeds served as collateral security rather than an exclusive repayment source.
As a result, the personal guarantees executed by Zaki, Hari, and Amrish remained enforceable.
The trial, which began in April 2023 before Judge Ahmad Murad Abdul Aziz, concluded under Quay in June 2026. Messrs Kumar Partnership represented Emrail and the guarantors, while Messrs Azmi & Associates acted for KFH.
The ruling clarifies the enforceability of Islamic financing agreements under Malaysian law, particularly where Shariah compliance and contractual obligations are concerned. It also highlights the risks for contractors in disputes over bond formats and project delivery requirements in large-scale infrastructure financing.
The judgement may set a precedent for future cases involving performance bonds in Islamic financing structures, where financial institutions retain discretion over instrument wording. Legal experts note that the decision reinforces the principle that financial institutions are not bound to comply with project-specific bond templates unless explicitly agreed in the financing documents.