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  • Ayushi Srivastava

COVID-19 and Vaccine Indemnification Under Indian Contract Act, 1872

Introduction

In November 2019 COVID-19 first struck the world and not lately was declared a Global Health Emergency by the World Health Organisation.[1] The whole world came to a standstill with one of the stringiest lockdowns being imposed in India as a measure of countering the pandemic. However, soon during the second wave of the pandemic, pictures of no logs of wood left for the cremation of the bodies of COVID-19 victims and scenes of their bodies floating in the rivers surfaced throughout the countries making herd immunity through vaccines the only viable option.[2] Realising the rampant vaccine requirement in the country and the imperativeness of importing vaccines in tackling the COVID-19 crisis, the Drugs Controller General of India (DGCI) in June 2021, decided to do away with the prerequisite of “specific trials of COVID-19 vaccines that have been approved by the US FDA, EMA, UK MHRA, PMDA Japan or listed for Emergency Use by the World Health Organisation.”[3] However, this move of the Indian government can’t be harbingered as breaking the impasse over the import of foreign vaccines such as Pfizer and Moderna in India. These vaccine manufacturers and the government still remain at loggerheads because of the former’s demand for indemnity exempting them from the liability of compensation in case of any side-effects.[4] What remains noticeable is that India has not granted this exemption from liability, however, Pfizer has it in all the countries where its vaccine has been exported leading to this deadlock.[5] 


The Indian Contract Act, 1872 inculcates the concept of indemnity merely under two sections, Sections 124 and 125.[6]contract of indemnity provides to “save one party from the losses caused from the conduct of the promisor himself, or by the conduct of any other person”[7] which includes “all damages or all costs or all sums which he may be compelled to pay in any suit.”[8]


Indemnification of vaccines under sect. 124 of ICA, 1872

Even though vaccines are generally perceived to be safe and effective they may be associated with side effects. “As on December 6, 2022, a total of 92,003 Adverse Events Following Immunisation (AEFI) have been reported since the start of Covid vaccination,” in India.[9] In light of the COVID vaccines in India, the moderate side effects, include “soreness at the injection site, pain, headache, weariness, myalgia, malaise, pyrexia, chills, and arthralgia.”[10] which can also lead to more adverse complications culminating in death.


The government’s granting of indemnity to any vaccine manufacturer “would mean that if a particular vaccine is perceived to have caused death or any lasting damage to a recipient, any claim of compensation arising from it will have to be met by the government, and not by the company.”[11] The indemnity sought by the companies will primarily be as a clause in any contract to indemnify against any losses that the government may sign with the vaccine manufacturers as the supplier.[12] All contracts of indemnity are contracts of insurance with some exceptions.[13] Insurance is a contract by which one party secures the other party from any loss or damages specified in exchange for consideration known as a premium.[14] Every contract of insurance has an insurable interest meaning “the risk of loss to which an assured would be exposed on the happening of the event.”[15]


It remains noteworthy that indemnification sought by the companies also falls under one of the above-mentioned exceptions. It can’t be claimed as “an indemnity bond executed on behalf of the government of India”[16] due to the restricted definition of the concept of indemnity under Section 124 of the ICA. In essence, the definition of indemnity remains incomplete because of the bilateral nature of contracts under the ICA. This section places obligations only on a party while ignoring the liability of the other party.[17] On proper analysis, the contract of indemnity can be termed merely a ‘promise’ as the use of term parties in Section 10 of the ICA points out the imperativeness of two or more parties to a contract as an essential of a contract.[18] Indeed, the section relating to indemnity i.e., Section 125 mentions indemnifier and indemnified as promisor and promisee.[19] Section 124(1) instead of the term contract of indemnity prefers a promise to indemnify.[20] The usage of such terms has slit open Pandora's box of confusion.


This section only allows only for one kind of indemnity. It mainly serves to allow one party to save the other party from the loss caused to him by his ‘conduct’ or that of any other person.[21] It primarily focuses on natural and juristic persons thereby eliminating the scope of other possibilities.[22] This section is not inclusive of “classes of cases where the indemnity arises from loss caused by events or accidents which do not or may not depend upon the conduct of the indemnifier or any other person.”[23] Also, this section prescribes for filing of an indemnity claim when “actual damnification” has occurred.[24] Thereby it leaves no room for claiming indemnity before actual damages have occurred. Any suit brought before is considered premature without realizing the toll it has on the indemnified as they can only claim damages after the liability has become absolute.[25] 


The constricted view of the concept of indemnity is further bolstered by the restricted conditions for claiming their rights by the indemnity holder. Section 125 of the ICA allows for indemnification of “all the damages relating to any matter to which the promise of indemnity applies.”[26] It is a general concept that upon breach of a contractual obligation the arising damages should be natural and can be reasonably contemplated [27] and if they are stipulated for, “must be a reasonable compensation and a true pre-estimate of damages determined by both parties and found to be such by the court and must not exceed the amount so specified or the penalty so mandated.”[28] These are based on the premise that damages should be compensatory and primarily aimed at restitution of the parties.[29]


Conclusion

It is high time now that the recommendations of the 13th Law Commission’s report should be given heed. In its report, the LC rightly pointed out that Section 124 doesn’t cover various aspects of indemnity and the same goes for Section 125 as it falls short of ensuring the rights of the indemnifier.[30]   It recommended that the definition of indemnity under Section 124 should be widened by including both express and implied contracts.[31] The said section should also encompass damages occurring from natural occurrences and accidents.[32] As suggested the liability of the promisor should be contoured under Section 125 which should not merely rise when the promisee suffers from some damage.[33] It recommended the addition of Section 125 A,[34] for enforcing the contract of indemnity before the occurrence of damages and Section 72(A) which would place contracts of indemnity on an equal pedestal with quasi-contracts.[35]


The present provisions for the contract of indemnity under ICA defeat the whole purpose of indemnity on being unjust for both the promisor and promisee because of a lot of grey areas present. 


India laws per se do not have any provisions relating to indemnification for granting approval for any new drug or vaccine in the country. However, the indemnification of drugs remains a lucrative option for importing drugs which remains imperative, India being a third-world country. Keeping in mind new viruses enlivening day by day and vaccines and drugs the only shield against them, the restricted definition of indemnity under Section 124 of the ICA may hinder the protection of both, the individual and the community against the morbidity and mortality associated with the illness. Despite the evidence of its efficacy and safety a minute number of risks associated may remain a concern. Vaccines not being a legal mandate[36] and all the information relating to the vaccines being freely available in the public domain, an individual can exercise his choice by not opting for vaccination.[37] Appreciating the speed with which the vaccine manufacturers developed the vaccines against COVID, indemnification of vaccines will be an impetus for them which can be done by enlarging its definition keeping pace with the needs of the present.

 

[1] Bindu S Perappadan, ‘COVID-19 Now a Pandemic, Says WHO; India Confirms 60 Cases’ The Hindu (11 March 2020) <https://www.thehindu.com/sci-tech/health/covid-19-is-now-a-pandemic-says-who/article61964197.ece>.

[2] Amarnath Tewary, ‘Bodies of Suspected COVID Victims Spotted in Ganga’ The Hindu (10 May 2021) <https://www.thehindu.com/news/national/other-states/bodies-of-suspected-covid-victims-spotted-in-ganga/article34527558.ece>.

[3] ‘DCGI Waiver Likely to Bring Foreign Vaccines like Pfizer, Mo ..’ Times of India (2 June 2021) <http://timesofindia.indiatimes.com/articleshow/83167652.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst>.

[4] ‘India and Pfizer at Impasse over Vaccine Indemnity Demand’ Times of India (21 May 2023) <http://timesofindia.indiatimes.com/articleshow/82827757.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst>.

[5] Poulami Ghosh, ‘Explained: What Is Indemnity for Vaccine Makers? What Pfizer, Govt Say about It’ Hindustan Times (2 June 2021) <https://www.hindustantimes.com/india-news/what-is-indemnity-for-vaccine-makers-what-pfizer-govt-say-about-it-101622638336579.html>.

[6] The Indian Contract Act 1872, s 124 and 125.

[7] The Indian Contract Act 1872, s 124.

[8] The Indian Contract Act 1872, s 125.

[9] Parvathi Benu, ‘A Close Look at Low Rate of Covid Vaccine Side Effects in India’ The Hindu Business Line (5 January 2023) <https://www.thehindubusinessline.com/data-stories/data-focus/a-close-look-at-low-rate-of-covid-vaccine-side-effects-in-india/article66329777.ece>.

[10] Sounak Mukhopadyay, ‘Multiple COVID Vaccine Side-Effects: Health Ministry Clears Air on Recent Report’ Livemint (18 January 2023) <https://www.livemint.com/science/health/multiple-covid-vaccine-side-effects-health-ministry-clears-air-on-recent-report-11674006211907.html>.

[11] K Venkataraman, ‘Explained | What Is Indemnity, and How Will It Affect COVID-19 Vaccine Pricing and Availability in India?’ (6 June 2021) <https://www.thehindu.com/sci-tech/health/explained-what-is-indemnity-and-how-will-it-affect-covid-19-vaccine-pricing-and-availability-in-india/article60678840.ece>.

[12] K Venkataraman, ‘Explained | What Is Indemnity, and How Will It Affect COVID-19 Vaccine Pricing and Availability in India?’ (6 June 2021) <https://www.thehindu.com/sci-tech/health/explained-what-is-indemnity-and-how-will-it-affect-covid-19-vaccine-pricing-and-availability-in-india/article60678840.ece>.

[13] IC Saxena, ‘General Principles of Insurance Law by A. K. Bhattacharjee’ (1969) 11 Indian Law Institute 112.

[14] Aditya Mehra, ‘Interpreting Insurance Contracts: Special Considerations – Part I’ (Cyril Amarchand Blogs, 25 October 2021) <https://corporate.cyrilamarchandblogs.com/2021/10/interpreting-insurance-contracts-special-considerations-part-i/>.

[15] Avtar Singh, Law of Insurance (3rd edn, EBC).

[16] K Venkataraman, ‘Explained | What Is Indemnity, and How Will It Affect COVID-19 Vaccine Pricing and Availability in India?’ (6 June 2021) <https://www.thehindu.com/sci-tech/health/explained-what-is-indemnity-and-how-will-it-affect-covid-19-vaccine-pricing-and-availability-in-india/article60678840.ece>.

[17] Wayne Courtney, ‘Indemnities and the Indian Contract Act 1872’ (2015) 27 Nat'l L Sch India Rev 66 < https://repository.nls.ac.in/nlsir/vol27/iss1/10/>.

[18] The Indian Contract Act 1872, s 10.

[19] The Indian Contract Act 1872, s 125.

[20] The Indian Contract Act 1872, s 124 (1).

[21] F Pollock and D Mulla, THE INDIAN CONTRACT ACT 1872, (Nilima Bhadbhade ed., 15th edn., LexisNexis, 2020).

[22] Akash Anand, ‘Analyzing Issues, Gaps And Flaws In Sections 124 And 125 Of The Indian Contract Act, 1872, And Providing Solutions’ (2022) 2 INTERNATIONAL JOURNAL FOR LEGAL RESEARCH & ANALYSIS < https://www.ijlra.com/paper-details.php?isuurl=analyzing-issues-gaps-and-flaws-in-sections-124-and-125-of-the-indian-contract-act-1872-and-providing-solutions-by-akshat-anand>.

[23] Gajanan Moreshwar Parelkar v. Moreshwar Madan Mantri, AIR 1942 Born 302.

[24] Sara Jain, 'Through the Looking Glass: A Narrow View of the Indian Law of Indemnity' (2021) 2 Indian JL & Legal Rsch 1 < https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/injlolw2&section=203>.

[25] ibid.

[26] The Indian Contract Act, s. 125(1).

[27] The Indian Contract Act, s. 73.

[28] Parul Kashyap and Aritra Chakraborty, ‘India: Revisiting The Principles Of Damages Under The Contract Regime In India’ (14 June 2021) <https://www.mondaq.com/india/contracts-and-commercial-law/1079412/revisiting-the-principles-of-damages-under-the-contract-regime-in-india>.

[29] Parul Kashyap and Aritra Chakraborty, ‘India: Revisiting The Principles Of Damages Under The Contract Regime In India’ (14 June 2021) <https://www.mondaq.com/india/contracts-and-commercial-law/1079412/revisiting-the-principles-of-damages-under-the-contract-regime-in-india>.

[30] Ankita Kalita and others, ‘Narrow Yet Broad; Clear Yet Blur: The Law Of Contract Of Indemnity In India’ (2023) 11 Russian Law Journal <https://cyberleninka.ru/article/n/narrow-yet-broad-clear-yet-blur-the-law-of-contract-of-indemnity-in-india>.

[31] Akash Anand, ‘Analyzing Issues, Gaps And Flaws In Sections 124 And 125 Of The Indian Contract Act, 1872, And Providing Solutions’ (2022) 2 INTERNATIONAL JOURNAL FOR LEGAL RESEARCH & ANALYSIS < https://www.ijlra.com/paper-details.php?isuurl=analyzing-issues-gaps-and-flaws-in-sections-124-and-125-of-the-indian-contract-act-1872-and-providing-solutions-by-akshat-anand>.

[32] Sara Jain, 'Through the Looking Glass: A Narrow View of the Indian Law of Indemnity' (2021) 2 Indian JL & Legal Rsch 1 <https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/injlolw2&section=203>.

[33] ibid.

[34] Wayne Courtney, ‘Indemnities and the Indian Contract Act 1872’ (2015) 27 Nat'l L Sch India Rev 66 < https://repository.nls.ac.in/nlsir/vol27/iss1/10/>.

[35] Akash Anand, ‘Analyzing Issues, Gaps And Flaws In Sections 124 And 125 Of The Indian Contract Act, 1872, And Providing Solutions’ (2022) 2 INTERNATIONAL JOURNAL FOR LEGAL RESEARCH & ANALYSIS < https://www.ijlra.com/paper-details.php?isuurl=analyzing-issues-gaps-and-flaws-in-sections-124-and-125-of-the-indian-contract-act-1872-and-providing-solutions-by-akshat-anand>.

[36] Srishti Ojha, ‘Nobody Can Be Forced To Get Vaccinated; Vaccine Mandates Not Proportionate : Supreme Court’ Live law <https://www.livelaw.in/top-stories/no-forcible-covid-vaccination-without-consent-vaccine-certificate-vaccine-mandate-centre-supreme-court-189614>.

[37] Deepankar Malviya, ‘Government Not Liable To Compensate For Deaths Due To COVID Vaccination : Centre Tells Supreme Court’ (29 November 2021) <https://www.livelaw.in/top-stories/government-not-liable-to-compensate-for-deaths-due-to-covid-vaccination-centre-tells-supreme-court-215344>.


This article has been authored by Ayushi Srivastava, a student of National Law University, Odisha. This blog is a part of RSRR's rolling blog submissions.



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