Indemnity bond

An indemnity bond is a promise by one person (the indemnifier) to protect another (the indemnity holder) against loss. A bank that releases a deceased depositor's money to an heir, or a company that issues a duplicate share certificate, asks for an indemnity bond so that it is covered if someone else later makes a valid claim.

The law behind it

Section 124 of the Indian Contract Act, 1872 defines a contract of indemnity as one by which a party promises to save the other from loss caused by the conduct of the promisor or of any other person. Section 125 lets the indemnity holder recover damages, costs and sums paid in a settlement, within the limits stated there.

When you will be asked for one

• Duplicate share certificates, fixed deposit receipts or demand drafts.
• Release of a deceased person's money without a succession certificate.
• Transfer of a connection, licence or registration on the basis of your declaration.

Indemnity and guarantee

In an indemnity there are two parties, and the promise is to cover a loss. In a guarantee there are three parties, and the promise is to pay if the borrower does not (see guarantor).

Draft an indemnity bond or an indemnity for a lost share certificate.