Section 74 of the Indian Contract Act, 1872, provides that where a sum is named in a contract as payable on breach, the party complaining of the breach is entitled to -

Section 74 provides that when a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or the penalty stipulated for. Indian law does not maintain the strict English distinction between liquidated damages and penalty; the court has discretion to award reasonable compensation subject to the ceiling of the sum named.