(1) The municipal council may compound or compromise in respect of any suit instituted by or against it or in respect of any claim or demand arising out of any contract entered into by it under this Act, for such sum of money or other compensation as it shall deem sufficient:

Provided that, if any sanction in the making of any contract is required by this Act, the like sanction shall be obtained for compounding or compromising any claim or demand arising out of such contract.

(2) The municipal council may make compensation out of the municipalfund to any person sustaining any damage by reason of the exercise of any of the powers vested in it, its officers, and servants under this Act.

(3) The municipal fund shall be liable to pay the expenses of any civilproceedings prosecuted or defended on behalf of the municipal council.