Indian Contract Act Section 125 — Rights of indemnity-holder when sued
CHAPTER VIII OF INDEMNITY AND GUARANTEE
Commercial / Corporate
Summary
The promisee in a contract of indemnity, when acting within the scope of their authority, is entitled to recover from the promisor the amounts described in the three numbered clauses below.
Under clause (1), the promisee can recover all damages that they are compelled to pay in any lawsuit, as long as the lawsuit relates to a matter covered by the promise to indemnify.
Under clause (2), the promisee can recover all costs that they are compelled to pay in such a lawsuit, provided that either they did not go against the promisor's orders and acted prudently as they would have without any indemnity contract, or the promisor authorized them to bring or defend the lawsuit.
Under clause (3), the promisee can recover all sums that they paid under the terms of any compromise or settlement of such a lawsuit, provided that the compromise was not against the promisor's orders and was one that the promisee would have prudently made without any indemnity contract, or the promisor authorized them to compromise the lawsuit.
Official Text
The promisee in a contract of indemnity, acting within the scope of his authority, is entitled to recover from the promisor—
(1) all damages which he may be compelled to pay in any suit in respect of any matter to which the promise to indemnify applies;
(2) all costs which he may be compelled to pay in any such suit if, in bringing or defending it, he did not contravene the orders of the promisor, and acted as it would have been prudent for him to act in the absence of any contract of indemnity, or if the promisor authorized him to bring or defend the suit;
(3) all sums which he may have paid under the terms of any compromise of any such suit, if the compromise was not contrary to the orders of the promisor, and was one which it would have been prudent for the promisee to make in the absence of any contract of indemnity, or if the promisor authorized him to compromise the suit.