Indemnity means where a person is victim of loss, compensation to him is to be provided or to save him from the loss caused by different causes.The contract of indemnity means a promise or statement of liability to pay compensation for a loss or for wrong in a transaction.Indemnity is the obligation, undertaken by one party to cover the loss or debt incurred by another. It is similar to a contingent contract, a part of general contract, and is of special nature.
The person whose loss is to be made good is called the indemnity holder. Indemnity holder is entitled to exercise certain rights under the Contract of Indemnity Section 22 (1) of the Nepalese Contract Act, 2056. According to this Act indemnity-holder has the following rights against the indemnifier to recover or claim. They are as follows: –
i) The entire indemnity amount (damage) prescribed in the contract.
ii) The amount to be paid or borne, in case any loss or damage has been caused to a third person.
iii) All the costs spent on the case filed or defended by him in connection with the contract relating to indemnity.
Source : Ramesh Prasad Yadav