UK Court orders Nirav Modi to pay Bank of India over Rs 100 crore in loan guarantee case

A London High Court has ruled that fugitive diamond businessman Nirav Modi must pay more than $10.7 million (over Rs 100 crore) to Bank of India under a personal guarantee linked to a loan given to one of his companies. The judgment is being seen as a major legal victory for the public sector bank in its efforts to recover dues from Modi, who is currently lodged in a London prison while fighting extradition to India.

Delivering the judgment in the London Circuit Commercial Court on Tuesday, Justice Simon Tinkler said: “Mr Modi is liable to the Bank in accordance with the personal guarantee for the principal amount due of $4.1 million (approximately Rs 38.9 crore). Interest calculated on the basis set out by the bank shall be added. “Mr Modi has given no defence as to why the bank was not entitled to that amount.”

The dispute arises out of a loan Bank of India provided to Dubai-based firm Firestar Diamond FZE in 2012. One year later Nirav Modi signed a personal guarantee that would make him liable to pay the loan if the company did not.

The Punjab National Bank (PNB) fraud allegedly involving Modi was uncovered in 2018 when the bank recalled the loan and asked for repayment from Modi and the company. Those demands, the court said, were not answered.

During the proceedings, Modi argued that the personal guarantee could not be enforced. He also said that he had not received valid repayment notices from the bank and asked why the bank decided to terminate the loan arrangement.

But Justice Simon Tinkler dismissed these arguments and held that Bank of India was entitled to recover the outstanding amount. The court said Modi had not given a valid defence as to why the bank should not be paid the money it was owed under the guarantee.

The key issue in the case was whether Modi had received the repayment notices sent by the bank. Modi said he was not in India when some of the notices were served and denied receiving them. But the court found that the notices had been properly served.

One notice has been sent to the London prison where Modi is currently being held and another was earlier shared with his legal team, the judgment said.

The court also spoke about the impact of the alleged PNB scam on the Firestar Group. “Once allegations of fraud arose in 2018 it was reasonable to conclude that the financial position of Firestar companies had been severely impacted, and so the risk to lenders increased,” Justice Tinkler said.

The judgment referred to an email sent by Modi in February 2018 admitting the situation had impacted the group’s ability to meet its financial obligations.

In its final order, the court upheld the validity of the personal guarantee executed by Nirav Modi and held that Bank of India is entitled to recover the principal amount along with interest as applicable.