By Gopal Ram Tripathi
IN A SIGNIFICANT LEGAL WIN for India's banking sector, the London High Court has ordered fugitive diamond businessman Nirav Modi to repay more than $10.7 million i.e. equivalent to over ₹100 crore, to Bank of India. On Tuesday, the judgement was delivered by Justice Simon Tinkler of the London Circuit Commercial Court, upholds a personal guarantee Modi signed over a decade ago for a loan he took for one of his companies.
The judgment is being widely seen as a turning point in India's long-running effort to hold Modi accountable for financial misconduct, even as criminal proceedings against him in connection with one of the country's biggest banking frauds continue to circle around the courts.
At the heart of the dispute is a loan sanctioned by Bank of India in 2012 to Firestar Diamond FZE, a Dubai-registered company in Modi's business empire. The following year, in 2013, Modi signed a personal guarantee, a legally binding commitment that made him personally liable for repaying the loan should the company default.
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For several years, the arrangement was held. But when the massive Punjab National Bank (PNB) fraud case exploded into public view in early 2018, the financial ecosystem around Modi began to collapse rapidly. Bank of India recalled the loan and served repayment notices on both Firestar Diamond FZE and Modi personally. Neither the company nor Modi responded to these demands.
In February 2018, however, Modi himself acknowledged in an email that the unfolding crisis had severely impacted his business group's ability to meet its financial obligations, a correspondence the court cited as a key piece of evidence in its final ruling.
During the proceedings, Modi laid out a three-fold legal challenge against the bank's recovery claim. He argued that the personal guarantee was legally unenforceable, that the bank had not served valid repayment notices upon him, and that the bank lacked the right to recall the loan citing a "material adverse change" clause.
Justice Tinkler rejected all three arguments extensively. In his judgment, the court noted that Modi had "not provided any valid defence" to explain why the bank was not entitled to recover the huge amount. The judge confirmed that Bank of India was fully entitled to receive the principal amount of $4.1 million which is approximately ₹38.9 crore, along with accumulated interest, bringing the total liability to over $10.7 million.
Notably, a summary judgment had already been granted in the bank's favour for the principal amount back in March 2024. Tuesday's final ruling resolved the remaining opposing questions, primarily around the interest calculation, settling the matter in the bank's favour in its entirety.
The civil recovery case runs parallel but is legally separated from the criminal extradition proceedings against Modi. The fugitive businessman has been in British custody since his arrest in London in March 2019, when he was picked up in connection with the PNB fraud that allegedly defrauded India's second-largest public sector bank of approximately ₹13,500 crore through fraudulent Letters of Undertaking.
His extradition to India has been approved by UK courts, and in a further blow earlier this year, the UK High Court refused to allow Modi to reopen extradition proceedings, paving the way for his eventual transfer to India once all legal avenues are exhausted.
While the civil verdict does not directly accelerate the extradition timeline, legal observers note that it significantly bolsters India's broader case against Modi by establishing clear financial liability in a foreign jurisdiction and reinforcing the pattern of the intended default that Indian authorities have claimed.
For Bank of India, the ruling validates its strategy of pursuing international legal solutions to recover funds from defaulters who have searched for refuge abroad. It also sends a strong signal that personal guarantees signed by Indian businessmen carry enforceable weight even in foreign courts.
As Modi remains behind bars in London awaiting the conclusion of extradition proceedings, Tuesday's verdict ensures his legal troubles are additioning.
[VP]
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