Explained: Five Defences Nirav Modi Raised In Bank of India Personal Guarantee Case And Why London Court Rejected Them

A court in London has held fugitive diamantaire Nirav Modi personally liable under a personal guarantee executed in favour of Bank of India.

In doing so, it rejected five principal defenses raised by him and directed him to pay USD 4,105,189.34 together with contractual interest to the Bank.

Deputy High Court Judge Simon Tinkler of the High Court of Justice, Business and Property Courts of England and Wales, delivered the judgment making Modi liable for over Rs 100 crore in personal guarntee obligations.

"The Financial Indebtedness set out in the October 2025 Modi Demand was plainly indebtedness of the First Defendant to the Bank. Mr Modi had agreed under the Personal Guarantee to pay the Bank those sums to the extent that the First Defendant had not done so. Mr Modi has not provided any defence to explain why the Bank was not entitled to demand that sum. I am satisfied that the Bank was entitled to demand the Financial Indebtedness of the First Defendant in the adjudged sum of USD 4,105,189.34 from Mr Modi."

The dispute arose from a facility agreement executed in July 2013 under which Bank of India extended credit facilities to Firestar Diamond FZE.

Around the same time, Modi executed a personal guarantee securing the company's obligations.

The Bank recalled the facilities in 2018 after Firestar Diamond FZE defaulted. It later obtained summary judgment against the company for USD 4,105,189.34. This was followed by a fresh demand in October 2025.

Modi resisted the Bank's claim on several grounds. The court examined each of them before holding him liable. Here are five of the key issues it dealt with.

1: The guarantee was unenforceable without RBI approval

According to him, the guarantee was not in compliance with the Reserve Bank of India's Foreign Exchange Management (Guarantees) Regulations, 2000 and therefore could not be enforced.

The court rejected the argument. It accepted the evidence of Bank of India's expert on Indian law, Sushmita Gandhi, that RBI approval could be granted retrospectively. The court also held that it was Modi's responsibility, and not the Bank's, to obtain the approval. It therefore concluded that the guarantee remained enforceable.

"I am therefore satisfied as a matter of fact that the answer to the question of the Enforceability Issue is that the Personal Guarantee is not void/unenforceable, because the RBI can at any point grant consent, which can be retrospective.", the court ruled.

2: The October 2025 demand notice was not validly served

Modi contended that the Bank had not validly served the October 2025 demand notice. To him, it was necessary for the demand to be served by registered post.

The court disagreed. It examined the facility agreement and found that it permitted service through any of the prescribed modes.

Registered post was not the only permissible mode of service. The court also found that Modi had been validly served with the demand.

"Mr Modi was validly served with the October 2025 Modi Demand. That was a valid demand for a liability to the Bank under the Personal Guarantee."

3: The Bank had to first recover the money from Firestar Diamond FZE

Modi argued that Bank of India could not invoke the personal guarantee without first proceeding against Firestar Diamond FZE. According to him, the Bank had to recover the money from the borrower before seeking payment from him.

The court rejected the contention. It held that the guarantee expressly allowed the Bank to proceed against the guarantor without first making a claim against or recovering the debt from the borrower.

"The Lender shall not be obliged to make any claim or demand on [the First Defendant] or to resort to any other means of payment now or hereafter held by or available to it before enforcing this Personal Guarantee.", the court noted, quoting the personal guarantee agreement.

4: The Bank was not entitled to recall the facilities in 2018

Modi challenged the Bank's decision to recall the facilities after allegations relating to the Punjab National Bank fraud surfaced in early 2018.

According to the court, this was however a reasonable action. It found that by mid-February 2018, Firestar Diamond FZE and other Firestar Group companies had suffered a material adverse effect.

The borrower had defaulted on repayments, failed to cooperate with the Bank's due diligence exercise and did not respond to communications. The court also relied on Modi's own email acknowledging that the developments had jeopardised the group's ability to repay banks.

"From mid-February 2018, it was reasonable to infer that the Borrower and every company in the Firestar Group was likely to be materially and negatively affected.", the court noted.

5: The Bank could not claim contractual interest after LIBOR ended

Modi argued that the Bank could not continue charging contractual interest after synthetic LIBOR ceased to be published. He contended that adopting another benchmark amounted to a variation of the facility agreement.

The court rejected the argument. It held that the facility agreement itself provided an alternative benchmark if LIBOR became unavailable. The Bank had therefore acted in accordance with the contract. There was no variation requiring Modi's consent.

"The Facility Agreement as drafted, and in relation to which Mr Modi gave his Personal Guarantee, plainly set out in the definition of LIBOR how the rate was to be calculated if no such rate was published. The Bank has calculated the rate in line with that agreed contractual position.", the court ruled.

Having rejected all five defenses and others, the court held Modi liable under the personal guarantee for the outstanding principal of USD 4,105,189.34 together with contractual interest payable to the Bank of India.