Ali Bahadur is arrested. Laxmi Bai tries to dissuade Gangadhar from going to Kanpur, but he leaves to meet Lord Dalhousie. Consumed with greed, Ali Bahadur states his overconfidence in getting the throne of Jhansi to Rao Dulhajo. Lord Dalhousie deceives Gangadhar into believing that, in return for the British flag being reinstated on the commissary, he would maintain Gangadhar's rulership and give the merchants' money to him. Laxmi Bai threatens Ali Bahadur. Rao Dulhajao helps him escape.
