धारा 63

Section 63 of the Indian Contract Act, 1872, states 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, as the case may be, the penalty stipulated for. The section further provides that in estimating the loss or damage caused by the breach, the court shall consider the circumstances of the case and the amount of the stipulated penalty. The Supreme Court of India has held that the stipulated penalty should be regarded as liquidated damages and not as a penalty. (Fateh Chand v. Bal Kishan Das, AIR 1963 SC 1405).