NMIMS Global Access School for Continuing Education (NGA-SCE)

Course: Business Law Internal

Assignment Applicable for June 2023 Examination

ANSWERS

Ans. 1.
According to the Indian Contract Act, Consent is when two or more persons agree
upon the same thing and in the same sense. So, the two people must agree to
something in the same sense as well.
Free Consent has been defined in Section 14 of the Act, which says that consent
is considered free when an agreement is made with the approval of both the
parties and is free from any kind of force or pressure. Free consent of contracting
parties is essential for a contract to be valid.

Consent is said to be free when it is not caused by:

1. Coercion
2. Undue Influence
3. Fraud
4. Misrepresentation
5. Mistake

Instances under which free consent in an agreement would be affected are:

1. Coercion (Section 15)

Coercion means using force to compel a person to enter a contract. So, force or
threats are used to obtain the consent of the party under coercion, i.e it is not free
consent.

For example: A threatens to hurt B if he does not sell his house to A for 5 lakh
rupees. Here even if B sells the house to A, it will not be a valid contract since B’s
consent was obtained by coercion.

The effect of coercion is that it makes the contract voidable. This means the
contract is voidable at the option of the party whose consent was not free. So, the
aggravated party will decide whether to perform the contract or to void the
contract. So, in the above example, if B still wishes, the contract can go ahead.

2. Undue Influence (Section 16)

Section 16 of the Act defines undue influence as a state when the relations
between the two parties are such that one party is in a position to dominate the
other party and uses influence to obtain an unfair advantage of the other party it
will be undue influence.

The section also further describes circumstances in which a party is in a dominant

position are:

 When a person holds real or apparent authority over the other person.
such as master and servant or principal and agent.
 When a party is in a fiduciary relationship with the other person such
as doctor and patient.
 When a party makes a contract with a person whose mental capacity is
affected by age, illness, or distress. The unsoundness of mind can be
temporary or permanent.
For example: A sold his gold watch for only Rs 500/- to his teacher B after his
teacher promised him good grades. Here the consent of A (adult) is not freely
given, he was under the influence of his teacher.

There is a presumption in law against the dominant party that he/she must have
abused his/her dominant position in making the contract.

3. Fraud (Section 17)

Fraud means deceit by one of the parties, i.e. when one of the parties intentionally
misrepresents material existing facts with knowledge of its falsity and hides the
same for the purpose of inducing the other party to enter into a contract. It
absolutely impairs free consent.

Here is an example of Fraud: A bought a horse from B. B claims the horse can be
used on the farm. Turns out the horse is lame, and A cannot use it on his farm.
Here B knowingly deceived A and this will amount to fraud.

4. Misrepresentation (Section 18)

Misrepresentation is also when a party makes a representation that is false,
inaccurate, incorrect, etc. The difference here is the misrepresentation is innocent,
i.e. not intentional. The party making the statement believes it to be true.
Misrepresentation can be of three types:

1. A person makes a positive assertion believing it to be true

2. Any breach of duty gives the person committing it an advantage by
misleading another. But the breach of duty is without any intent to
deceive.
3. when one party causes the other party to make a mistake as to the
subject matter of the contract. But this is done innocently and not
intentionally.

For example: if a real estate agent is selling a property that has a major defect
such as damage to the foundation, the owner may have told the agent that
nothing is wrong with the house. The agent has a responsibility to make sure the
owner is telling the truth before representing the house as being free of defects
to potential buyers. This would be considered negligent misrepresentation.

5. Mistake

A mistake is an erroneous belief that is innocent in nature. It leads to a

misunderstanding between the two parties. A mistake may be unilateral or
bilateral. When talking about a mistake, the law identifies two types of mistakes:

i. A Mistake of Law
ii. A Mistake of Fact

For Example: If a party commits an error of applying service tax for the contract
instead of Goods and Service Tax (GST), the party shall still be liable for non-
compliance under GST.

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Ans. 2.

Environment Protection Act (EPA), 1986 is an Act of the Parliament of India. It

was enacted in May 1986 and came into force on 19 November 1986. It has 26
sections and 4 chapters.
The act authorizes the central government to protect and improve environmental
quality, control, and reduce pollution from all sources, and prohibit or restrict
the setting and /or operation of any industrial facility on environmental grounds.
The regulation and administration of environmental protection laws in India are
done by a combination of the Ministry of Environment and Forest (MoEF), the
Central Pollution Control Board (CPCB), and the State Pollution Control
Boards (SPCBs).

The Indian Judiciary, the custodian of constitution, has been giving red flag for
protection of Environment while interpreting the constitution in a positive
manner. Our Judicial history is full of landmark decisions where it has played a
vital role in the protection of environment. Two such instances where the courts
of India have intervened for the protection of Environment are as below:

1. Art of Living Case on Yamuna Flood Plain; National Green Tribunal

The National Green Tribunal (NGT) held the Art of Living Foundation
of Sri Sri Ravi Shankar responsible for the alleged damage caused to
the Yamuna floodplains due to the World Cultural Festival organized
in March 2016. NGT Panel found that the organizers of the Art of
Living Festival violated the environmental norms, and it has severely
damaged the floodplain area at the bank of Yamuna River in Delhi.
Earlier, the Government of Delhi and Delhi Development Authority
(DDA) has permitted the Art of living festival organizers, but it was
an under some conditions. The NGT panel imposed a penalty of Rs.
5 Crore on Art of Living Foundation as environmental compensation
after coming down heavily on the foundation for not disclosing its
full plans. The panel also warned AOL Foundation that in case of
failure to pay the penalized amount the grant of Rs.2.5 crore which
the ministry of culture is supposed to pay AOL will be attached.
While reacting with dismay to the verdict, the Art of Living
Foundation expressed disappointment and claimed that it had
complied with all environment laws and norms and its’ submissions
were not considered by NGT. The Art of Living Foundation said in a
statement that- “We will appeal to Supreme Court. We are confident
that we will get justice.”

2. Tarun Bharat Sangh, Alwar v. Union of India

The petitioners have brought this PIL for enforcement of certain notifications
under the WPA, 1972; EPA, 1986; and various Forests Laws in areas declared
as Reserved Forests in Alwar District of Rajasthan. The area now more popular
as the Sariska Tiger Park has been declared as the Game Reserve, a Sanctuary, a
National Park, a Reserved Forest, and a Protected Area. Thus, it is
understandable that any mining activity in that area shall be conflicting and not
permissible as under the Forest Conservation Act of [Link] Government of
Rajasthan has illegally and arbitrarily issued about 400 mining licenses and
hereby enabled them to carry on the mining operations, which according to the
petitioners will tend to degrade and diminish the ecology of the area. The Court
after observing various laws and facts went on praising the importance and
beauty of the ecology and its resources and said that “every source from which
man has increased his power has been used to diminish the prospects of his
successors.”

The Court directed the Central Government to act under Sec 3 of the EPA, 1986
and appoint a committee to ensure the enforcement of the above laws and to
prevent devastation of the environment and wildlife within the protected area.
The committee shall access the damage alone to the environment and wildlife
and make appropriate recommendations to this Court as to ascertain the
remedial measures. The Court further declared that no mining activity can be
carried out in the said area.

Ans. 3. (1.)

A provident fund is an investment fund that is set up typically to save for long-
term goals such a retirement. In India, we have different types of provident fund
plans for individuals from various categories of employment, such as self-fund
plans for individuals from various categories of employment, such as self-
employed, private sector employees, and government employees.

The Employees Provident Fund and Miscellaneous Provision Act, 1952 (EPF
Act) is applicable to the whole of India. The EPF Act aims to set up provident
fund, pension fund and deposit linked insurance as a means of social security. It
becomes applicable for establishments with 20 or more employees.

The government has set up some rules to calculate how much funds are to be
allocated into the EPF account for each employee. Basically, the provident fund
of every employee in a company comprises of two contributions. The
employee’s own contribution as well as the employer’s contribution.

The employee contributes 12 percent of his or her basic salary along with the
Dearness Allowance every month to the EPF account.

For example: If the basic salary is Rs. 15,000 per month, the employee
contribution shall be 12 % of 15000, which comes to Rs 1800/-. This amount is
the employee contribution.
Out of 12 percent, the employer is required to contribute 8.33 percent to the
Employee Pension Scheme while the remaining 3.67 percent must be
contributed to the EPF. Thus 3.67 % of Rs 15,000 is Rs 550/-.

Therefore, the total contribution to the EPF account every month for a person
with R 15,000 salary will be the employee contribution plus the employer
contribution, which will be Rs. 2350/- in this case.

The following are the percentage of salary contributed by employer and

employee in various schemes:

 Provident Fund:
Employee’s contribution: 12% on Basic + DA
Employer:
(a) 3.67% on Basis + DA
(b) Administration Charges: 0.01% on Basic + DA
 Pension Scheme:
Employee’s contribution: No Contribution
Employer: 8.33% on basic + DA
 Insurance Scheme:
Employee’s contribution: No Contribution
Employer: 8.33% on Basic + DA

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Ans 3. (2)

Gratuity is defined as a monetary award provided to the working employees for

providing uninterrupted services during the employment period. It is an
additional retirement benefit paid voluntarily by the employer to the employee
for sincere and continuous services rendered by him/her. The payment of
Gratuity is mandatory provided he/she has rendered continuous services for a
period of five years or more.

The gratuity rules are formed under the payment of gratitude act, of 1972. On
21st August 1972, this rule was passed by the parliament and came into force on
16th September 1972.

As per the Gratuity act, Companies with a workforce of 10 or more than 10

employees on a single day in the previous 12 months are subject to pay gratuity.
Even if the employees of the company are reduced to below 10, it will still be
liable to pay the gratuity.
Entitlement for Gratuity (Section 2A):

Gratuity is payable to employees who have rendered a continuous service of

five years or more, interrupted only on account of sickness, accident, leave,
absence from duty without leave (not amounting to break in service under the
relevant standing orders), lay off, strike, or lockout or cessation of work not due
to the fault of the concerned employee.

Calculation of Gratuity:

The basic formula for calculation of Gratuity amount is:

Gratuity = Last drawn salary × 15/26 × number of completed

years of service)
 The ratio of 15/26 represents 15 days out of 26 working days in a month.
 The last drawn salary comprises basic and dearness allowance (DA) and
no other part will be included in the salary.
 Completed years of service comprise any year where an employee has
rendered services for more than six months.

In case of Seasonal employee, 7 days wages for each season are taken into
consideration.

Gratuity = (Basic + DA) × 15/26 × number of years.

Example: If A had joined the job on 01-08-2004 and retired or got his job
terminated on 30-04-2018, with last drawn basic salary of Rs. 30,000/- and DA
of Rs. 13,000/-, his gratuity will be:

(30000 + 13000) × 15/26 × 14 = Rs. 3,47,307.70

However, it should be noted that the minimum amount of the gratuity paid
under the PGA, 1972 is 3.5 lakhs. The maximum gratuity amount cannot exceed
20 lakhs (earlier 10 lakh), Rupees, which is exempted from Income tax.