The Croatian, who craves a move to Chelsea, informed Tottenham chairman Daniel Levy he wanted out in a stormy meeting.
But Levy told Modric, 25, he would let him rot on the bench rather than sell him to the Blues, who have made a £22million bid for his services.
Levy dug his heals in and told Modric he would not be sold at any price.
The Spurs chief insisted he would not entertain any increased bids insisting it would "make no difference".
An insider said: "The gloves are off. Luka reminded Levy that when he signed a new contract there was an agreement he could go if he felt it was better for his career.
"But Levy wasn't interested and told Luka he had to tell the papers he was staying.
"Luka refused and said he would never do that and told Levy he was appalled he was reneging on their deal."
Modric is back in training at Spurs today and will meet boss Harry Redknapp and emphasise his determination to quit.
After meeting Modric, Levy claimed: "Everything was fine. We had a very good conversation and, as I said previously, Luka Modric will not be sold.
"It's the end of it. As I said a few weeks ago there's no further discussion on it.
"I'm sure once he's back with his team-mates everything will be fine. This is not about money, we're not selling our best players."
It is understood Chelsea are prepared to pay Modric £150,000 a week which is almost four times what he is on at Spurs.
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