KRIDE encashes ₹57 crore guarantees as tribunal backs move in L&T suburban rail dispute

KRIDE successfully encashed ₹57 crore in guarantees after a tribunal upheld its decision in the L&T suburban rail dispute.

The Rail Infrastructure Development Company (Karnataka) Limited (KRIDE) has invoked and encashed performance bank guarantees worth ₹57 crore issued on behalf of Larsen and Toubro. This follows the Arbitration Tribunal’s decision rejecting L&T’s plea to restrain the move, KRIDE said.

KRIDE stated that the guarantees, issued by YES Bank, pertained to civil works under Corridor 2 and Corridor 4 of the Bengaluru Suburban Rail Project (BSRP). The tribunal’s decision, KRIDE claimed, allowed it to proceed with encashing the guarantees, which it completed on April 4.  

According to KRIDE, the tribunal upheld its position that L&T had defaulted on the execution of the two corridor works and subsequently “terminated the agreements unilaterally and illegally, not as per the terms and conditions of the contracts.” 

Earlier, L&T had terminated the agreements for Corridor 2 and Corridor 4 and secured a stay from a commercial court against the encashment of the bank’s guarantees. The company also invoked the arbitration clause in the contract, leading to the constitution of an arbitration tribunal comprising retired Supreme Court and High Court judges to examine L&T's claims and KRIDE’s counterclaims. The commercial court later referred all related matters to the tribunal.  

KRIDE said the tribunal’s decision to “reject L&T’s request to injunct the invocation of the guarantees” enabled it to proceed with the encashment.

The dispute between KRIDE and L&T has its roots in the execution of key civil packages of the BSRP, particularly Corridor 2 (Mallige line) and Corridor 4 (Kanaka line), which were among the initial priority stretches taken up after construction began in 2022.