Indian Contract Act, 1872
125. Right of indemnity-holder when
sued
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.