I solved the problem by completely changing my model.

These are some of the changes

I implemented.
1. Converted my rigid body to deformable with high elastic radius (5 times of E of
diamond)
2. Surface to surface contact definition was much better when I changed the rigid
body to a deformable body
3. Did not apply ALE any more
4. Kept the time scale similar to that of the real experiment i.e lenght of the
scratch x 1/speed of the scratch
5. Varied the mass scaling factor until the problem of distortion was not
encountered
6. Optimized the model by varying mesh size and mass scaling factor
I hope this helps!