What is an indemnity bond? When is it used in real estate?

Among many legal documents, part and parcel of real estate dealings, is the indemnity bond. This guide will explain in detail the nitty-gritty involved in the making of this document and its legal implications.

 

What is an indemnity bond?

In a contract, indemnity is a promise by one party to back the other party in case of any future damage or loss. A document that carries out details, such as an agreement, is known as an indemnity bond. Often used by banks, this bond protects the lender from loss if the borrower defaults on a legally binding loan.

The two parties involved in this legal contract are known as indemnitor and indemnitee.

 

What is the purpose of an indemnity bond?

An indemnity bond is drafted and executed to provide protection to one party in the contract in case the other party fails to fulfill its obligations or causes financial loss or damage. Depending on the terms and conditions in the bond, the indemnitor promises to compensate the indemnitee from any future losses or damages. Used in various kinds of business transactions, an indemnity bond protects the indemnitee from potential risks in future.

 

Use of indemnity bonds

Indemnity bonds are used in a wide variety of legal contracts, involving an individual and a business. It is also used to regulate other contracts between businesses and the government or between governments of two or more countries. Indemnity bonds are made in the following circumstances:

• Borrowing funds from banks or financial institutions
• For the release of payments
• In case of losing a fixed deposit receipt.
• Transfer of property to legal heirs
• For death claims
• Transfer of electricity connection
• Government indemnity schemes

 

INDEMNITY BOND format 1 

LETTER OF INDEMNITY

(To be duly stamped as per the Stamp Act applicable to the state)

(Letter of Indemnity with respect to payment of balance in the Deceased Constituents Account without production of legal representation)

 

To,

 

The Branch Manager/Chief Manager/Assistant. General Manager, State Bank of India 

IN CONSIDERATION of your paying or agreeing to pay us,

 

Insert here the names of the claimants

1 __________________________

2 __________________________

3 __________________________

4 __________________________

5 __________________________

6 __________________________

 

The sum of Rupees                                                                                    standing at the credit of Saving Bank/Current/RD Account No. etc., with your bank in the   name                                                              of       Shri/Smt./Kum.                                                           since deceased, without production of Letter of Administration or a Succession Certificate to his/her estate or a certificate from the Controller of Estate Duty to the effect that estate duty has been paid or will be paid or none is due we,

 

Insert here the name(s) of the sureties

1 __________________________

2 __________________________

do hereby for ourselves and our heirs, legal representatives, executors, and administrators, jointly and severally UNDERTAKE AND AGREE to indemnify you and your successors and assign against all claims, demands, proceedings, losses, damages, charges, and expenses which may be raised against or incurred by you by 

reasons or in consequence of your having agreed to pay/ or paying me/us the said sum as aforesaid. 

Signed, sealed, and delivered by the above named on this day of

                     two thousand                          . SIGNED AND DELIVERED by the above named

1.                                      
2.                                      
3.                                       
4.                                      
5.                                       
6.                                      

(heir(s)/claimant(s) of the deceased)

 

SIGNED AND DELIVERED by the above named 

1.                                      
2.                                      

(sureties)

 

INDEMNITY BOND format 2

 (To be typed on non-judicial stamp paper of Rs 100/ and attested by the notary public)

 

This indemnity bond is executed on this                day of <YEAR> by

           , Son of                                       , resident of   , locality      , Tehsil         & District                  in favour of director, town, and Country Planning Haryana (herein referred as ‘director’).

 

WHEREAS the applicant who is engaged in         activities has applied to the director for grant of permission for <NAME OF THE SERVICE>.

 

AND whereas, the applicant has submitted copies of revenue record showing him as the absolute/true/lawful owner of the land comprised in Khewat No.                                                                           , Khatoni No.

             , Khasra No.         situated within the revenue estate of village       Tehsil,            District          in respect of which the applicant has sought permission for <NAME OF THE SERVICE> by applying online.

 

AND whereas the applicant declares/affirms that there is no dispute or litigation of any sort in respect of the above said land, for which permission for <NAME OF THE SERVICE> has been sought by applying online, and no litigation of any sort is pending against the applicant or any other person representing the applicant in any court of law or tribunal in India.

AND whereas, the applicant also declares/affirms that the above said land is free from all encumbrances or charge.

 

AND whereas, the applicant executes this indemnity bond to indemnify the Director, Town and Country Planning, Haryana, or any of his officers/staff, against any third-party claim in respect of right, title or interest of the above said land for which application for

<NAME OF THE SERVICE> has been made.

 

AND whereas in the event where any information to the contrary comes to the notice of the director, or if any injury or loss occurs or shall occur to director as a result of any litigation in respect of right, title or interest of the above said land or having any liability of any charge or encumbrances, the director shall be at liberty to reject the application or cancel the permission.

 

AND whereas under sub-section (1) of Section 20 of the Punjab Scheduled Roads and Controlled Areas Restriction of Unregulated Development Act, 1963, no suit, prosecution or other legal proceedings shall lie against any person in respect of anything which is in good faith done or intended to be done in pursuance of the Act of 1963 or the rules made thereunder. Further under sub-section (2) of the said Section 20 no suit or other legal proceeding shall lie against the government for any damage caused by anything which is in good faith done or intended to be done in pursuance of the Act of 1963 or the rules made thereunder.

 

NOW, therefore, this deed witnesses and the applicant agree to undertake to indemnify the interests of director and its officers/staff and to keep them harmless against any claim or demand made or proceedings initiated by any one against director and its officers/staff in respect of right, title, or interest of the above said land including the damages, interest or cost thereof.

NOW this bond witness as follows:

1. That I stand surety and execute this indemnity bond for the genuineness of all the documents being submitted for the <NAME OF THE SERVICE>.
2. That in case of any legal/financial claim/ liability arising out of any objection/ claim/ dispute by any of the other co-sharers of land in future, the executants and its legal heirs and successors hereby indemnify the DTCP, Haryana and the State Government of any such legal/ financial claim/ liability.
3. That no compensation of any kind shall be expected or demanded by the executants against any action taken by either the Director Town and Country Planning, Haryana or the State Government including that of cancellation of permission issued for compliance of any legal pronouncement against the Director Town and Country Planning, Haryana, or the State Government
4. That the liability arising out of any such claim shall be the sole responsibility of the executants and no compensation or legal action of any kind shall lie towards the Department the Government or the State and the executants and its legal heirs and successors shall be liable to make good the loss if any against all such claims.

 

In witnesses whereof this deed has been executed at        by the applicant in the presence of witnesses. 

 

Date: ……………………………

Place: ………………………….

  

Witness 

Applicant / Executant

 

View and download indemnity bond PDF format

Indemnity bond format for legal heirs

Click here to download PDF.

Indemnity bond format for housing society

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Indemnity bond format for loss of property documents

Click here to download PDF.

Indemnity bond format for death claim

Click here to download PDF.

Indemnity bond for electricity connection

Click here to download PDF.

Indemnity bond for electricity transfer

Click here to download PDF.

Indemnity bond format for release of payment

Click here to download PDF.

Indemnity bond format for lost fixed deposit receipt

Click here to download PDF.

Lease deed indemnity bond

Click here to download PDF.

 

FAQs

What is the meaning of indemnity?

The Oxford dictionary describes indemnity against something as protection against damage or loss, especially in the form of a promise to pay for damage or loss. It also describes indemnity as a sum of money given as payment for damage or loss.

What is a bond?

A bond is a legally written agreement or promise.

What is an indemnity bond?

An indemnity bond assures the holder of the bond that he will be compensated in case of loss.

Who issues indemnity bonds?

Indemnity bonds are issued by institutions, such as banks, or insurance companies.

Who is an indemnitor in an indemnity bond?

The party making the promise to pay for the damage is the indemnitor in an indemnity bond.

Who is an indemnitee in an indemnity bond?

The party receiving the promise to get paid for any damage in future is the indemnitee in an indemnity bond.

Is stamping of the indemnity bond necessary?

An indemnity bond does require stamp paper, and the cost varies based on state regulations. In Delhi, for instance, an indemnity bond must be on a paper worth Rs 100 of stamp while in other states in India, it might range up to Rs 300.

Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com