The birthday occasion arrives and Franklin seems out of sorts. Before the celebration, Franklin and Rachel are still finishing painting the door. Rachel is given the Diamond; her mother is distressed by the Colonel’s Will. The Diamond harnesses everyone’s attention. Godfrey proposes to Rachel, and she refuses. At the party, Rachel wears the Diamond pinned onto her dress on her chest. Mr. Candy, the doctor at Frizinghall, is present, and so is the well-travelled Mr. Murthwaite, who has been to many places in India. Mr. Murthwaite tells Rachel to never bring the Diamond with her if she goes to India, saying that a “Hindoo diamond is sometimes a part of a Hindoo religion,” and that she would most likely be killed for it (101). The discussion over dinner includes an argument between Mr. Candy and Franklin over the uses of medicine; Franklin, now sleeping poorly because of his quitting smoking, tells the doctor that he does not believe in modern medicine, while Mr. Candy tells him that using some medicine would help him sleep better.
The Indian entertainers come to the house the evening of the party, and Mr. Murthwaite tells Franklin and Betteredge that the three Indians are not jugglers, but high-caste Brahmin priests in disguise. He tells Franklin that Franklin is very lucky to have escaped with his life while he was still carrying the Diamond, given the old family story about how it was obtained. That night, Rachel insists on keeping the Diamond in her own room, even though her cabinet has no lock on it. Franklin drinks a little bit of brandy-and-water, when pressed to take something before he goes to bed.
The next morning, Penelope runs to tell her father that the Diamond is gone. Rachel is clearly upset, and withdraws into her bedroom, closing the door. Franklin takes over the investigation of the Diamond, and calls the local police. Everyone believes the Indians have stolen the Diamond, and so they write to Frizinghall to have the three Indians detained in the city hall. Rachel is behaving strangely, even to her mother, and Godfrey is listless and wandering. Franklin goes to question the Indians at Frizinghall, and finds out that they are innocent and have not been near the house during the night. Superintendent Seegrave arrives and notices a smear in the just-dried paint on Rachel’s bedroom door. He suspects and accuses Penelope, since Penelope was the first person in to see Rachel in the morning. He also tries to question Rachel, but the girl refuses to be questioned. Later, she comes out and speaks harshly to Franklin, before hiding away again. Seegrave questions all the servants, making them upset with his suspicions. Franklin decides to call in a better detective from London, seeing Seegrave’s incompetence. Rosanna now appears to know more about the Diamond than she shows—she comes to see Franklin with a ring he dropped, and talks mysteriously about how the Diamond will never be found; then, she goes to her room saying that she is ill. A couple days later, the baker’s man reports that he saw Rosanna wearing a thick veil walking towards Frizinghall in the afternoon when she was supposedly sick; news comes of Mr. Candy being feverish after going home in the rain after Rachel’s birthday celebration.
Soon, Sergeant Cuff from London comes in, and appears as the complete opposite to Superintendent Seegrave; he has a special knowledge of roses, and comments on the gardener’s taking care of Lady Verinder’s rose garden. Cuff first examines the smear, and confirms that it couldn’t have been from the female servants’ petticoats, as put forth by Seegrave; based on the time the paint needed to dry, the smear had to have happened in the middle of the night before. Rachel comes out only to tell Cuff not to let Franklin Blake help in the investigation, before locking herself away. Cuff comments on Seegrave’s incompetence; the two are annoyed with each other, and Cuff hums “The Last Rose of Summer” throughout the investigation. Lady Verinder has trouble dealing with Sergeant Cuff, feeling as though he brings misery into her house, and has Betteredge deal with him for her instead.
Sergeant Cuff embarks on a journey to discover the dress that has the smear on it. When Rosanna Spearman brings him the washing-book, he recalls that she was previously in prison for theft. He asks to be able to search all the wardrobes in the house, but Rachel refuses, so he does not go forth with that method. He begins to suspect Rachel; on a walk outside, he sees Rosanna hiding in the bushes and Betteredge confesses that it is likely that Rosanna has feelings for Franklin. Cuff examines the servants through interviews, and finds out more of Rosanna’s suspicious behavior. Betteredge talks to the servants afterwards, and tells the impulsive Franklin, who almost tells Lady Verinder that Rosanna is the thief—before Cuff stops them, since there is more to be discovered.
Cuff asks Betteredge to take him to the Shivering Sand, and then to Cobb’s Hole. He believes someone else, whom he will not yet name, is using Rosanna. They go to the Yollands’ cottage, and talk to Mrs. Yolland. Cuff finds out that Rosanna bought a tin box and two dog chains from Mrs. Yolland; Rosanna is best friends with their daughter, Limping Lucy. When they return to the house, they find out that Rachel wants to go to stay with the Ablewhites (she feels it is unbearable to have a policeman in the same house); Cuff requests to speak to her quickly before she goes. Finally, Betteredge realizes that Cuff suspects Rachel. Cuff believes Rachel is using Rosanna, and that Rachel wants to use the Diamond to pay off debts she might have.
Rosanna again comes to Franklin with strange behavior, and Sergeant Cuff passes the night sleeping in the corridor before Rachel’s room to see if Rosanna and Rachel would have communication that night.
After Rachel’s birthday arrives, much action occurs: the Diamond is missing, declared stolen, a police officer arrives and botches the case, and another police officer arrives to begin setting things right. Godfrey Ablewhite is introduced as a competitor to Franklin Blake, and while he seems to have all better qualities than the other cousin, something about Franklin is still favored by the family, and Betteredge’s narrative tone. The Diamond is finally brought into the open, where it shines with an eerie light of its own. Like the East where it came from, it is mystery, shining yellow and unnaturally.
The dinner party, its participants, and its conversations are all told in detail by Betteredge, given his penchant for elaboration. This is already a filtered version of what occurred—given that Betteredge is looking back and picking out what he deems as important from that night. It is true that some of these conversations prove important—the argument between Franklin and Mr. Candy will be unexpectedly relevant later.
When the Indians show up at the birthday party later, Mr. Murthwaite the adventurer tells Betteredge and Franklin about the Indians and how they act. He says that they are not afraid to kill men—comparing it to the “ashes left in your pipe, when you empty it" (109). (Franklin will later try to use this analogy for women, after being rejected by Rachel.) Mr. Murthwaite implicitly compares the Indians to dogs when he tells Betteredge to release the mastiff and bloodhound into the yard that night, since the dogs, too, are not concerned with the sanctity of human life.
After her Diamond disappears, Rachel’s behavior becomes increasingly erratic, even given her fiercely independent personality. Betteredge and others close to her continue to attribute it to her despair over losing it. Superintendent Seegrave is hired to solve the mystery, but by accusing Penelope, he sets all the other servants on edge. When Sergeant Cuff is called in, he embarrasses Seegrave to the point that the other officer retorts back. Betteredge refuses to feel bad for Seegrave because of how the officer held his daughter under suspicion.
The conflict between Seegrave and Cuff is based off of the real-life investigation of the Road Hill House Murder. The local police were called in to investigate the murder of a child, and suspicion immediately fell on the nanny who was supposed to be taking care of him. However, because the case was getting nowhere, famous Scotland Yard (Cuff is also from Scotland Yard) detective Jack Whicher was called in. Whicher immediately suspected the stepsister of the boy, Constance Kent (who was indeed the real murderer), but could not prove so. Furthermore, it was difficult for people to believe that a girl of fine breeding like Constance could be capable of such an act (especially when accused by a working-class man). Whicher went back to London a disgrace. During the investigation, Whicher focused on a missing nightgown, which would help his case. However, just as Superintendent Seegrave botched the nightgown evidence, real-life Superintendent Foley found a bloodstained nightgown in the chimney, but lost it after his guards were accidentally locked in the kitchen. Fearing that losing this nightgown might have him and his men charged for incompetence, Foley did not tell Whicher, or anyone else, about the discovery and its subsequent disappearance.