A commercial court in Bengaluru has delivered a significant ruling in a high-stakes infrastructure dispute, rejecting a plea from engineering giant Larsen & Toubro (L&T) that sought to prevent a state-owned corporation from calling on bank guarantees. The case pertains to contracts for the ambitious Bengaluru Suburban Railway Project (BSRP).
Court Rejects Injunction Against Bank Guarantee Encashment
The court dismissed L&T's application to restrain Karnataka Rail Infrastructure Development Company (K-RIDE) from invoking or encashing bank guarantees furnished under contracts for Corridor-4 of the BSRP, specifically the stretch between Heelalige and Rajanukunte. L&T had provided two guarantees: a mobilisation bank guarantee worth Rs 28.6 crore and a performance bank guarantee worth Rs 31.2 crore, totaling Rs 59.8 crore.
However, the judicial order is not an absolute loss for the construction major. The court clarified that L&T retains the liberty to approach the arbitral tribunal already constituted to adjudicate the underlying disputes between the parties. The company can seek similar relief from that tribunal.
Interim Protection and the Court's Observations
In a crucial interim measure, the commercial court has provided protection to L&T against the invocation of these bank guarantees, but only for a limited period. This protection is valid until January 24, 2026, after which it will be automatically vacated unless extended by a competent authority.
The court's decision was influenced by its reading of the project's progress, or lack thereof. It noted that the available documents indicated L&T could not complete substantial work or show progress despite work front availability, citing several hindrances. More critically, the court pointed out that L&T itself terminated the contract unilaterally via a notice dated July 28, 2025.
This act of termination played a pivotal role in the court's reasoning. It concluded that the balance of convenience did not lie in favour of L&T, a key principle considered in granting injunctions. The company's own decision to exit the contract weakened its position in seeking pre-emptive relief from the court.
Implications for the Bengaluru Suburban Rail Project
This legal tussle casts a spotlight on the implementation challenges facing the critical Bengaluru Suburban Railway Project, a much-needed infrastructure solution for the city's traffic woes. The dispute over Corridor-4 could potentially lead to delays, depending on the outcome of the arbitration and subsequent steps taken by K-RIDE after the interim protection lapses in 2026.
The ruling underscores the legal and financial risks inherent in large-scale public infrastructure projects. While L&T must now pivot its strategy to the arbitral tribunal, K-RIDE has secured a judicial affirmation of its right to potentially encash the guarantees, subject to the arbitration award and the 2026 deadline. The case will be closely watched by other contractors and developers involved in similar public-private projects across India.
