Chapter III - Relations of Partners to One Another
Section 10
Section 10: Duty to indemnify for loss caused by fraud
Section 10 makes a partner personally answerable to the firm for any loss he causes it through fraud in conducting the firm's business.
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Need advice on Section 10?
This article is for general information. Refer to the Indian Partnership Act, 1932 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
Every partner shall indemnify the firm for any loss caused to it by his fraud in the conduct of the business of the firm.
Key takeaways
Personal indemnity
A partner must make good to the firm any loss caused to it by his fraud in the conduct of the business of the firm.
Fraud and wilful neglect
Section 10 is not expressed to be subject to contract; the separate indemnity for wilful neglect in section 13(f) is.
What section 10 covers
The duty is owed to the firm and applies to loss caused by the partner's fraud in the conduct of the firm's business. It sits alongside the general duties in section 9: partners must carry on the business to the greatest common advantage, be just and faithful to each other, and render true accounts and full information.
How it fits with sections 13(f) and 26
Section 13(f) provides, subject to contract between the partners, that a partner shall indemnify the firm for any loss caused by his wilful neglect in the conduct of the business. Section 10 deals with fraud and is stated without that qualification. The firm's own liability to outsiders for a partner's wrongful act or omission is a separate question under section 26.
Hypothetical business example
Hypothetical: A partner records fictitious purchases and diverts the payments to himself, causing the firm a loss. Section 10 requires that partner to indemnify the firm for the loss. Other remedies, such as a suit for dissolution by the Court under section 44, may also be relevant.
Check the applicable state law
The India Code consolidated central text (as on 7 July 2025) records no State amendment to section 10, although several States have amended other sections of the Act, mainly those on registration of firms. Confirm the law of the State where the firm carries on business, and the firm's own partnership agreement, before acting.
Practical checklist
Do
- Keep records showing who authorised and handled each transaction.
- Quantify the firm's loss and link it to the conduct relied on before claiming the indemnity.
Avoid
- Do not treat an honest error of judgment as fraud.
- Do not overlook the firm's own exposure to third parties under section 26.
Glossary
- Indemnify
- To make good a loss suffered by another.
- Conduct of the business
- Acts done in carrying on the firm's business.
Frequently asked questions
To whom is the indemnity owed?
To the firm. Section 10 requires the partner to indemnify the firm for loss caused to it by his fraud.
Does section 10 cover negligence?
No. Section 10 is about fraud. Loss caused by wilful neglect is addressed by section 13(f), which applies subject to contract between the partners.
Is the firm still liable to outsiders?
It may be. Section 26 makes the firm liable for loss caused by a partner's wrongful act or omission in the ordinary course of business or with the authority of his partners; section 10 governs the partner's liability to the firm.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026