Explanation:

Section 74 of Indian Contract Act -  Compensation of breach of contract where penalty stipulated for. When a contract has been broken, if a sum is named in the contract as the amount 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 68not actual damage or loss or 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. ExplanationA stipulation for increased interest from the date of default may be a stipulation by way of penalty. ExceptionWhen any person enters into any bail bond, recognisance or other instrument of the same nature or, under the provisions of any law, or under the orders of the Central Government or of any State Government, gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon breach of the condition of any such instrument, to pay the whole sum mentioned therein. ExplanationA person who enters into a contract with the government does not necessarily thereby undertake any public duty, or promise to do an act in which the public are interested.