Many Indian contracts name a sum that one side must pay if it breaks the contract. Under Section 74 of the Contract Act, a court does not simply award that sum. In Fateh Chand v. Balkishan Dass, decided in 1963, the Supreme Court said the court “will award to the party aggrieved only reasonable compensation not exceeding the amount named or penalty stipulated.”
The figure in the contract is a ceiling, not a price.