Rights of Indemnity Holder
Rights of Indemnity Holder
1. What is Indemnity?
Under Section 124 of the Indian Contract Act, an indemnity contract is one where the promisor promises to save the promisee from loss caused to him by the conduct of the promisor or any other person.
The person protected from loss is called the indemnity-holder (promisee).
2. Who is an Indemnity Holder?
The person who has the right to claim compensation from the indemnifier when loss occurs.
He is entitled to be protected against loss or damage caused by the acts of the promisor or a third party.
3. Rights of the Indemnity Holder
(i) Right to Recover Compensation
The indemnity holder has the right to recover the amount of loss or damage suffered as per the terms of the contract.
This includes loss due to acts of the promisor or a third party.
(ii) Right to Recover from the Promisor
The indemnity holder can directly sue the promisor (indemnifier) for any loss.
The liability of the indemnifier is absolute and unconditional once the loss is caused.
(iii) Right to Recover Expenses
The indemnity holder can recover all expenses incurred in the protection of the indemnified interest.
This may include litigation costs or costs incurred to prevent loss.
(iv) Right to Recover Loss Caused by Third Parties
The indemnity holder is protected even if the loss was caused by the act of a third party.
The promisor undertakes to indemnify against such losses.
(v) Right to Institute Suit
The indemnity holder may institute suit against the promisor as soon as loss occurs or expenses are incurred.
No need to wait for the promisor to commit an act.
4. Conditions for Exercising Rights
The indemnity holder must have suffered actual loss or damage.
The loss must be directly caused by the promisor or third party as per the indemnity contract.
5. Relevant Case Law
1. Amratlal Prajivandas v. Union of India (1968 AIR 1317)
Held that indemnity holder can recover expenses incurred in protecting indemnified interest.
Emphasized the right to recover expenses related to loss prevention.
2. National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd. (2009)
Supreme Court clarified that indemnity contract means promise to save from loss caused by promisor or third party.
The indemnifier’s liability is co-extensive with loss suffered.
3. Union of India v. M.C. Chockalingam (1971)
Discussed indemnity in government contracts.
Reinforced that indemnity holder can claim losses arising from third party acts under contract terms.
6. Summary Table
| Rights of Indemnity Holder | Explanation |
|---|---|
| Recover Compensation | Get back losses suffered due to promisor or third party |
| Recover Expenses | Claim expenses incurred to protect interest |
| Sue Promisor Directly | Can sue indemnifier without delay |
| Protection Against Third Party Acts | Loss caused by others also covered |
| No Need to Wait for Actual Payment by Promisor | Immediate right on loss occurrence |
7. Quick Recap
Indemnity holder’s rights are broad and protective.
Right to compensation arises immediately on loss.
Can recover expenses and sue promisor directly.
Protection extends to losses caused by third parties.
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