Which statement accurately reflects the definition and legal effect of a "contract of indemnity" under Section 124 of the Indian Contract Act, 1872? 

Section 124 defines a contract of indemnity: "A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person, is called a contract of indemnity." Key distinctions exist: (i) An indemnity holder is the party receiving the promise of protection; (ii) An indemnifier is the party promising protection; (iii) The loss must be caused either by the indemnifier's conduct or a third party's conduct. Importantly, a contract of indemnity differs from guarantee (Section 126), where the guarantor is liable only if the principal debtor defaults. Section 125 grants the indemnity holder rights to recover fees paid, costs incurred, and settlement amounts. In Nallappa Reddi v. Vridhachala Reddi (1914), the Supreme Court held that liability of the indemnifier arises upon occurrence of the loss, and compensation includes both direct and indirect losses arising from the indemnified event.