Section 48(2) when the financial and administrative powers of the President of a municipality cease.

The issue in
controversy 
A Division Bench of
this Court, finding itself “unable to accept the law” laid down in a
decision of a Full Bench in Hafiz Ataullah Ansari Vs State of U P1, referred
the following questions for determination by a larger Bench: 
“(a) Whether
the Full Bench judgment in the case of Hafiz Ataullah Ansari Vs. State of U.P.
(supra) lays down the correct law; 
(b) Whether in view
of the language of the proviso to Section 48(2) of the U P Municipalities Act,
there can be any proceedings for removal of the President without his financial
and administrative powers ceasing, under the proviso; 
(c) Whether
cessation of financial and administrative powers of the President follows
automatically with the issuance of a show cause notice under Section 48 (2)
calling upon him to show cause as to why he may not be removed; 
(d) Whether any
separate order for cessation of financial and administrative powers of the
President is required to be made while issuing a notice under the proviso to
Section 48(2) or such cessation follows automatically; and 
(e) Whether in view
of the specific language of Section 48(2), the question of opportunity of
hearing before cessation of the financial and administrative powers of the
President stands excluded.” 
Since a decision
rendered by a Bench of three Judges which constituted the Full Bench in Hafiz
Ataullah Ansari has been doubted, the reference comes before this Bench of five
Judges. 
Sub-section (2) of
Section 48 enables the State Government to issue a notice to show cause to the
President of a municipality to explain why he should not be removed from office
where the State Government has “reason to believe” that any of the
provisions of clauses (a) or (b) are attracted. Broadly speaking, the reason to
believe relates to any one of the breaches specified in clause (a) or in
sub-clauses (i) to (xvii) of clause (b) of sub-section (2). Each of them has a
bearing on the discharge or the failure to discharge duties on the part of the
President of a municipality or conduct of a nature which is proscribed therein.
In the event that the State Government has reason to believe that any of those
stipulations is attracted, it is empowered to call upon the President to show
cause why he should not be removed from office. 
The proviso to
Section 48 (2) entails that where its conditions are fulfilled, the President
of a municipality shall cease to exercise, perform and discharge the financial
and administrative powers, functions and duties of the President until he is
exonerated of the charges mentioned in the notice to show cause and the
finalization of the proceedings under sub-section (2-A). In order that the
proviso be attracted, several stipulations have to be fulfilled. These
stipulations are – firstly, that the State Government must have reason to
believe that the allegations do not appear to be groundless; secondly, the
State Government must have reason to believe that the President is prima facie
guilty of any of the grounds contained in the sub-section resulting in the
issuance of the notice to show cause and proceedings thereunder; and thirdly,
that the notice to show cause must contain the charges against the President of
the municipality. Where these three conditions have been fulfilled, the
consequence entailed by the proviso to sub-section (2) comes into being and the
President shall cease to exercise, perform and discharge the financial and
administrative powers, functions and duties of the President until exonerated
of the charges mentioned in the notice to show cause and finalization of the
proceedings under sub-section (2-A). 
The judgment of the
Full Bench 
In Hafiz Ataullah
Ansari, a Full Bench of this Court held that Section 48(2) may envisage two
situations – the first, where the financial and administrative powers of a
President do not cease and the other, where they cease. The Full Bench held
that a ceasing of the financial and administrative powers of the President can
take place only where the conditions specified in the proviso to Section 48 (2)
apply. As the Full Bench held: 
“54.
The intention of the legislature is clear from the language of the provision.
It envisages two kinds of proceedings under section 48(2) of the Municipalities
Act: 
One,
simpliciter where financial and administrative powers of the President do not
cease; 
The other,
where his financial and administrative powers cease. This can happen only if
the conditions under proviso to section 48(2) are satisfied. 
55. The proviso to
Section 48(2) is meant to apply in the serious situation where it is expedient
to cease the financial and administrative powers of the President. It is not to
apply in every case. It is for this reason that extra precautions have been provided
in the proviso to Section 48(2) of the Municipalities Act.” 
Dealing with the
conditions which have been spelt out in the proviso to Section 48 (2), the Full
Bench observed as follows: 
“73. The
proviso to Section 48(2) of the Municipalities Act prescribes conditions that
have to be fulfilled before the right of a President to exercise financial and
administrative powers can cease. It states that: 
(i) The State
Government should have reasons to believe that: 
The allegations do
not appear to be groundless; and 
The President is
prima facie guilty of any of the grounds mentioned in Section 48(2) of the
Municipalities Act. 
(ii) The State
Government should also issue show cause notice for removal under Section 48(2)
of the Municipalities Act and it must contain charges. 
74. The phrase
‘reasons to believe’ is often used in statutes and has been repeatedly held by
the Courts (for citation of the rulings see below)3 to mean that reasons for
the formation of the belief must have a rational connection or relevant bearing
on the formation of the belief. Rational connection postulates that there must
be a direct nexus or live link between the material and formation of the
belief.” 
On the applicability
of the principles of natural justice before the financial and administrative
powers of the President of a municipality cease, the Full Bench emphasised that
such an order envisages civil consequences which cannot be cured merely by a
post-decisional hearing: 
“In the case,
where a head of a local body is deprived to exercise financial and
administrative power, and ultimately the proceeding for removal are dropped
then in such an event his loss can never be compensated. A post decisional
hearing cannot cure the harm/damage done to him.” 
The Full
Bench opined that it was necessary to furnish an opportunity of submitting an
explanation to the head of the local body and this would eliminate an arbitrary
exercise of power, besides bringing about fairness in procedure. In the view of
the Full Bench: 
“…The
principles of natural justice or the yardstick of fairness would be met if the
explanation of the affected head of the local body or his point of view or
version is considered before recording the satisfaction or finding of prima
facie guilt before issuing notice and passing order for ceasing financial and
administrative powers.” 
The Full
Bench has explained that such an opportunity to submit an explanation need not
be as detailed as in a regular enquiry and all that is necessary is to enable
the elected head of the municipality to have his point of view or version
considered. The conclusions which were arrived at by the Full Bench were as
follows: 
“133.
Our conclusions are as follows: 
(a) There
can be proceeding for removal of President under Section 48(2) of the
Municipalities Act without ceasing his financial and administrative power under
its proviso; 
(b)The
following conditions must be satisfied before cessation of financial and
administrative powers of a President of a Municipality can take place: 
(i) The
explanation or point of view or the version of the affected President should be
obtained regarding charges and should be considered before recording
satisfaction and issuing notice/order under proviso to Section 48(2) of the
Municipalities Act; 
(ii) The
State Government should be objectively satisfied on the basis of relevant
material that: 
The
allegations do not appear to be groundless; and 
The
President is prima facie guilty of any of the grounds under Section 48(2) of
the Municipalities Act. 
(iii) The
show-cause notice must contain the charges against the President; 
(iv) The
show-cause notice should also indicate the material on which the objective
satisfaction for reason to believe is based as well as the evidence by which
charges against the President are to be proved. Though in most of the cases
they may be the same; 
(c) It is
not necessary to pass separate order under proviso to Section 48(2) of the
Municipalities Act. It could be included in the notice satisfying the other
conditions under proviso to Section 48(2). In fact it is not even necessary. It
comes into operation by the Statute itself on issuance of a valid notice under
proviso to Section 48(2) of the Municipalities Act. 
(d) In
case a notice/order ceasing financial and administrative powers is held to be
invalid on any ground then this does not mean that the proceeding of removal
are also invalid. They have to continue and taken to their logical end. The
proceeding to remove can come to an end only if the charges on their face or
even taken to be proved do not make out a case for removal under Section 48(2)
of the Municipalities Act. 
(e) It is
not necessary to involve the President with the process of collecting material
or give President the copies of the material before asking his explanation or
point of view or version of the President to the charges.” 
In 2004, the Uttar
Pradesh Municipalities (Amendment) Act, 20047 was enacted by the state
legislature. By the Amending Act, a provision which was numbered as sub-section
2-A was introduced in Section 48 in the following terms: 
“(2-A)
Where in an inquiry held by such person and in such manner as may be
prescribed, if a President or a Vice-President is prima facie found to be
guilty on any of the grounds referred to in sub-section (2), he shall cease to
exercise, perform and discharge the financial and administrative powers,
functions and duties of the President or the Vice-President, as the case may
be, which shall, until he is exonerated of the charges mentioned in the
show-cause notice issued to him under sub-section (2), be exercised and
performed by the District Magistrate or by an officer nominated by him not
below the rank of the Deputy Collector.” 
The reason which led
to the introduction of sub-section (2-A) in the above terms was spelt out in
the Statement of Objects and Reasons accompanying the introduction of the Bill
in the state legislature. The State of Objects and Reasons provided as follows: 
“Section 48 of
the Uttar Pradesh Municipalities Act, 1916 (U.P. Act No. 2 of 1916) provides
for the removal of President of a municipality. 
In the
said Section the State Government is empowered to issue show-cause notice to
the guilty President on the grounds mentioned under Section 48, before removing
him from his office. Most of the Presidents used to delay the proceedings by
not replying the show-cause notice in time and they continue to misuse their
financial powers. It has, therefore, been decided to amend the said Act to
cease the financial powers of such President or a Vice-Present during the
pendency of the inquiry and his financial powers and functions will be
exercised and performed by the District Magistrate until he is exonerated of
the charges. 
The Uttar Pradesh
Municipalities (Amendment) Bill, 2004 is introduced accordingly.”
(emphasis supplied) 
The numbering of the
above provision as sub-section 2-A suffered from an obvious error on the part
of the legislative draftsman. That was because there was already in existence a
provision, numbered as sub-section (2-A) which had been introduced by U P Act
26 of 1964 to entrust the State Government with the power of removal to be
exercised after considering the explanation that may be offered and upon making
an enquiry as considered necessary and for reasons to be recorded in writing.
The existing sub-section (2-A) which provides for removal was not deleted. The
new provision was erroneously numbered as sub-section (2-A). This mistake was
rectified by the Uttar Pradesh Municipalities (Amendment) Act, 20058. By the
Amending Act, sub-section 2-A, as was inserted by U P Act 6 of 2004, was
omitted and, in its place, a proviso was introduced in sub-section (2). The
proviso which we have analysed earlier sets out the manner in which and the
conditions upon which the financial and administrative powers of the President
can cease. 
Part IX-A of the
Constitution 
Part IX of the
Constitution contains provisions in relation to the panchayats. Part IX-A
provides for the municipalities. These provisions were introduced by the
Seventy-third and Seventy-fourth amendments to the Constitution. Municipalities
and panchayats as institutions of local self- government have a constitutional
status. Their role and position are defined by the Constitution as are their
powers, duties and responsibilities. They are not mere administrative agencies
of the State but, as institutions of self-governance, have been conferred with
a degree of autonomy to ensure that democracy finds expression at the
grassroots of Indian society. The Constitution seeks to attain a
decentralisation of democratic governance through these institutions. 
The extent of
control which the agencies of the State exercise over these institutions of
local self-government must necessarily conform to constitutional standards.
State legislation of a regulatory nature must be interpreted in a manner that
fosters the attainment of constitutional objectives. The Court, consistent with
the high constitutional purpose underlying Parts IX and IXA of the
Constitution, must give expression to the autonomy expected to be wielded by
the constitutionally recognized levels of local self-government. Hence, while
interpreting state legislation, the need to conform to constitutional
parameters must be borne in mind. An interpretation of state legislation which
will dilute the autonomy of institutions of local self-government must, to the
extent possible, be avoided. Similarly, an interpretation which would result in
reducing the panchayats and municipalities to a role of administrative
subordination must be eschewed. Consequently, where an issue arises in regard
to the removal of an elected head of a municipality, as in the present case,
the procedure prescribed by the law must be followed. The law itself must be
interpreted in a manner that would render it fair, just and reasonable in its
operation and effect. Moreover, in areas where the law is silent, an effort
must be made by the Court in the process of interpretation to ensure that the
procedure for removal is just, fair and reasonable to be consistent with the
mandate of Article 14. 
In Ravi Yashwant
Bhoir Vs District Collector, Raigad9, the appellant who was the President of a
Municipal Council was declared to be disqualified under the provisions of the
Maharashtra Municipal Councils, Nagar Panchayats and Industrial Townships Act,
1965. Among the charges against him, was a failure to call for a general body
meeting, the acceptance of fresh tenders at high rates in connection with the
work of laying down a water supply pipeline and allowing unauthorized
construction. A writ petition filed by the elected head was dismissed by the
High Court. In appeal, the Supreme Court emphasized the importance ascribed by
Parts IX and IXA of the Constitution to the role and position of the elected
head of a local self-governing institution in the following observations: 
“Amendment in
the Constitution by adding Parts IX and IX-A confers upon the local
self-government a complete autonomy on the basic democratic unit unshackled
from official control. Thus, exercise of any power having effect of destroying
the Constitutional institution besides being outrageous is dangerous to the
democratic set-up of this country. Therefore, an elected official cannot be
permitted to be removed unceremoniously without following the procedure
prescribed by law, in violation of the provisions of Article 21 of the
Constitution, by the State by adopting a casual approach and resorting to
manipulations to achieve ulterior purpose. The Court being the custodian of law
cannot tolerate any attempt to thwart the institution.”10 
Dealing with the
aspect of observing the principles of natural justice, the Supreme Court held
that: 
“There can also
be no quarrel with the settled legal proposition that removal of a duly elected
member on the basis of proved misconduct is a quasi-judicial proceeding in
nature. [Vide: Indian National Congress (I) v. Institute of Social Welfare11].
This view stands further fortified by the Constitution Bench judgments of this
Court in Bachhitar Singh v. State of Punjab12 and Union of India v. H. C.
Goel13. Therefore, the principles of natural justice are required to be given
full play and strict compliance should be ensured, even in the absence of any
provision providing for the same. Principles of natural justice require a fair
opportunity of defence to such an elected office bearer.”14 (emphasis
supplied) 
The
Supreme Court observed that an elected official is accountable to the
electorate and removal has serious repercussions since it takes away the right
of the electorate to be represented by a candidate who is elected. Undoubtedly,
the right to hold the post is statutory and in that sense is not absolute but
removal can take place – it was held – only after strictly adhering to the
provisions laid down by the legislature for removal. The requirement of
observing the principles of natural justice was hence held to be mandated
before an order of removal is passed: 
“…the law on
the issue stands crystallized to the effect that an elected member can be
removed in exceptional circumstances giving strict adherence to the statutory
provisions and holding the enquiry, meeting the requirement of principles of
natural justice and giving an incumbent an opportunity to defend himself, for
the reason that removal of an elected person casts stigma upon him and takes
away his valuable statutory right. Not only the elected office-bearer but his
constituency/electoral college is also deprived of representation by the person
of his choice.”15 
A Bench of three
learned Judges of the Supreme Court in Tarlochan Dev Sharma Vs State of
Punjab16 dealt with the power of removal under Section 22 of the Punjab
Municipal Act, 1911. The Supreme Court emphasized that : 
“In a
democracy governed by rule of law, once elected to an office in a democratic
institution, the incumbent is entitled to hold the office for the term for
which he has been elected unless his election is set aside by a prescribed
procedure known to law. That a returned candidate must hold and enjoy the
office and discharge the duties related therewith during the term specified by
the relevant enactment is a valuable statutory right not only of the returned
candidate but also of the constituency or the electoral college which he
represents. Removal from such an office is a serious matter. It curtails the
statutory term of the holder of the office. A stigma is cast on the holder of
the office in view of certain allegations having been held proved rendering him
unworthy of holding the office which he held. Therefore, a case of availability
of a ground squarely falling within Section 22 of the Act must be clearly made
out. A President may be removed from office by the State Government, within the
meaning of Section 22, on the ground of “abuse of his powers” (of
President), inter alia.”17 
Interpreting the
expression “abuse of powers” as a ground for removal, it was held
that this would not mean the mere use of power which may appear to be simply
unreasonable or inappropriate but implies a willful
abuse or an intentional wrong.
 
In Sharda Kailash
Mittal Vs State of Madhya Pradesh18, the Supreme Court construed the power
vested in regard to the removal of the President of a Nagar Palika under the
Madhya Pradesh Municipalities Act, 1961. The Supreme Court emphasized that the
power has to be exercised for strong and weighty reasons and not merely on the
basis of minor irregularities in the discharge of the duties by a holder of an
elected office. In that context, the Supreme Court observed thus: 
“There
are no sufficient guidelines in the provisions of Section 41-A as to the manner
in which the power has to be exercised, except that it requires that reasonable
opportunity of hearing has to be afforded to the office-bearer proceeded
against. Keeping in view the nature of the power and the consequences that
flows on its exercise it has to be held that such power can be invoked by the
State Government only for very strong and weighty reason. Such a power is not
to be exercised for minor irregularities in discharge of duties by the holder
of the elected post. The provision has to be construed in strict manner because
the holder of office occupies it by election and he/she is deprived of the
office by an executive order in which the electorate has no chance of
participation.”19 (emphasis supplied) 
These decisions
emphasise the importance of the role and position of elected heads of
government under Part IXA of the Constitution. They represent the electorate
and their removal affects the right of the electorate to be governed by an
elected head accountable to it. Hence the power of removal which the State
exercises under legislative provisions has to be exercised strictly in
accordance with the terms of authorizing legislation. Removal entails
consequences of a serious and adverse nature. Hence an order of removal has to
be preceded by compliance with the principles of natural justice, whether or
not there is an express statutory provision. 
Natural justice as
an incident of procedural fairness 
The next aspect of
the matter which must be emphasized is the importance of the observance of
natural justice as an integral element or facet of procedural fairness. The
principles of natural justice in our jurisprudence are not only a foundational
basis of administrative law as it has evolved but constitute an essential part
of fair procedure guaranteed by Article 14 of the Constitution. Observance of
natural justice has progressively been extended to areas of administrative
decision making where the decision is liable to result in serious consequences
for those who are affected or regulated. The line between what is judicial or
quasi-judicial on one hand and what is administrative on the other, has
progressively been effaced. 
In C B Gautam Vs
Union of India20, the Supreme Court held that even where a statutory provision
– in that case Section 269UD of the Income Tax Act 1961 – does not provide
specifically for compliance of the principles of natural justice, adherence to
those principles must be read into the interstices of the statute. 
These principles
have been reiterated in a recent judgment of the Supreme Court in Dharampal
Satyapal Limited Vs Deputy Commissioner of Central Excise, Gauhati21 where it
was held that: 
“It,
thus, cannot be denied that the principles of natural justice are grounded in
procedural fairness which ensures taking of correct decisions and procedural
fairness is fundamentally an instrumental good, in the sense that procedure
should be designed to ensure accurate or appropriate outcomes. In fact,
procedural fairness is valuable in both instrumental and non-instrumental
terms.”22 
Again, the Supreme
Court emphasized that the applicability of the principles of natural justice is
not dependent upon an enabling statutory provision for, where a decision is
liable to result in an adverse consequence, natural justice must be observed despite
the absence of a statutory requirement to that effect. The principle which was
formulated by the Supreme Court is thus: 
“...the courts have consistently insisted that such procedural
fairness has to be adhered to before a decision is made and infraction thereof
has led to the quashing of decisions taken. In many statutes, provisions are
made ensuring that a notice is given to a person against whom an order is
likely to be passed before a decision is made, but there may be instances where
though an authority is vested with the powers to pass such orders, which affect
the liberty or property of an individual but the statute may not contain a
provision for prior hearing. But what is important to be noted is that the
applicability of principles of natural justice is not dependent upon any
statutory provision. The principle has to be mandatorily applied irrespective
of the fact as to whether there is any such statutory provision or
not.” 
Interpreting Section
48 (2) 
Now, it is in this
background that it would be necessary to interpret the provisions of Section
48(2). The substantive part of sub-section (2) empowers the State Government to
issue a notice to show cause to the President of a municipality as to why he should
not be removed from office where it has reason to believe that the requirements
of clause (a) or clause (b) have been fulfilled. The substantive violations
which are adverted to in clauses (a) and (b) of sub-section (2) cover a broad
spectrum. At one end of the spectrum is clause (a) which postulates that there
has been a failure on the part of the President in performing his duties. On
the other hand, clause (b) covers a broad range of violations including: 
(i)
incurring one of the stipulated disqualifications; 
(ii)
acquisition of a share or interest in a contract or employment with the
municipality; 
(iii)
knowingly acting as a President or as a member in a matter in which he/she has
a direct or indirect share or interest, whether pecuniary or otherwise; 
(iv)
acting as a legal practitioner against the municipality or the State Government
in respect of certain classes of proceedings or subjects; 
(v)
abandoning an ordinary place of residence in the area; 
(vi)
misconduct in the discharge of duties; 
(vii)
flagrant abuse of position, willful contravention of the Act or regulations or
bye-laws or causing loss or damage to the property or fund of the municipality
during the current or the last preceding term while acting as a President,
Chairman of a Committee, member or in any other capacity; 
(viii)
misconduct, whether as a President or as a member; 
(ix) loss
or damage to the property of the municipality; 
(x)
misappropriation or misuse of municipal funds; 
(xi)
acting against the interest of the municipality; 
(xii)
contravention of the provisions of the Act or the rules; 
(xiii)
creating obstacles in the orderly conduct of a meeting of the
municipality; 
(xiv)
willful contravention of an order or direction of the State Government; 
(xv)
misbehaviour without any lawful justification with officers or employees of the
municipality; 
(xvi)
disposal of the property of the municipality at a price less than its market
value; and 
(xvii)
encroachment over the land, building or property of the municipality or
instigation of such acts. 
The proviso to
sub-section (2), it must be noted, does not stipulate that the mere issuance of
a notice to show cause under the substantive part of sub-section (2) would
result in the President ceasing to exercise the financial and administrative
powers, functions and duties of the office. On the contrary, the proviso
stipulates, firstly, that the State Government must have reason to believe that
the allegations do not appear to be groundless; secondly, there must be a
reason to believe on the part of the State Government that the President is
prima facie guilty on any of the grounds set out in the sub-section resulting
in the issuance of the show cause notice and proceedings there-under; and
thirdly, the show cause notice must contain the charges which have been
levelled against the President of the municipality. In other words, this
threefold requirement has to be fulfilled before the cessation of financial and
administrative powers, functions and duties takes effect. 
Reason to
believe 
The proviso requires
the State Government to have a reason to believe. Reason to believe postulates
an objective satisfaction after an application of mind to material and relevant
circumstances. The expression “reason to believe” when used in a
statute is to be distinguished from an exercise of a purely subjective
satisfaction. 
In Barium Chemicals
Ltd Vs Company Law Board23, the Supreme Court held that the words “reason
to believe” or “in the opinion of” do not always lead to the
construction that the process of entertaining a reason to believe or the opinion
is altogether a subjective process, not lending itself even to a limited
scrutiny by the Court that it was not formed on relevant facts or within
statutory limits. Explaining the words “reason to believe” in Section
147 of the Income Tax Act 1961, the Supreme Court in ITO Vs Lakhmani Mewal
Das24 held that the reasons for the formation of belief must have a rational
connection with or a relevant bearing on the formation of the belief. A
rational connection postulates that there must be a direct nexus or live link
between the material coming to the notice of the Income Tax Officer and the
formation of his belief that there has been escapement of the income of the
assessee from assessment on a failure to disclose fully or truly all material
facts. Every material, howsoever vague, indefinite or distant, would not
warrant the formation of the belief. Moreover, the reason for the formation of
the belief must not be a mere pretence and must be held in good faith. 
In Shiv Nath Singh
Vs Appellate Assistant Commissioner of Income Tax, Calcutta25, the Supreme
Court held that the expression reason to believe suggests that the belief must
be that of an honest and reasonable person based on reasonable grounds and not
merely on suspicion. These principles were reiterated in a judgment of the
Supreme Court in Bhikhubhai Vithlabhai Patel Vs State of Gujarat26. 
The formation of a
reason to believe within the meaning of the proviso must be on objective
considerations which have a rational connection or link to the material before
the State Government. Fairness requires that this be disclosed to the President
of the municipality before the consequences in the proviso ensue. The President
must have an opportunity to explain. 
The State Government
is also required by the proviso to be of the view that the President is prima
facie guilty on any of the grounds contained in the sub-section which have
resulted in the issuance of the notice to show cause. The formulation of a
reason to believe that the allegations do not appear to be groundless and that
the President is prima facie guilty on any of the grounds mentioned in the
sub-section would postulate that before these statutory requirements are found
to exist, a fair opportunity of being heard must be granted to the President of
the municipality. A finding of prima facie guilt must, in our view, be
consistent with a prior fulfillment of the norms of natural justice, consistent
with the stage of enquiry. There is intrinsic evidence in the statutory
provision which leads to the inference that the mere issuance of the notice to
show cause does not a fortiori result in the cessation of the financial and
administrative powers, functions and duties but it is only when the conditions
which are spelt out in the proviso exist, that such a consequence will follow.
If a mere issuance of a notice to show cause was intended to necessarily result
in the consequence of the cessation of financial and administrative powers as
envisaged in the proviso, the legislature would have made a provision to that
effect. On the contrary, the legislature has carefully crafted a statutory
provision, in the form of a proviso which ensures that it is only upon the
State Government having a reason to believe that the allegations do not appear
to be groundless and that the President is prima facie guilty on any of the
grounds contained in the sub-section, that the cessation of the financial and
administrative powers would follow from the date of the issuance of the notice
to show cause containing the charges. 
The cessation of
financial and administrative powers of an elected head of a municipality is a
matter of significance and is replete with serious consequences. The effect of
the financial and administrative powers, functions and duties being ceased, has
a direct impact upon the authority of the elected head. It erodes authority and
impacts upon the ability of the President to effectively discharge the
functions of the office by preventing the discharge of financial and
administrative authority. Bereft of financial and administrative powers,
functions and duties, the office of the President of a municipality is reduced
to a cipher. In fact, the proviso envisages that upon the powers being ceased,
they shall be exercised by the District Magistrate or an officer nominated, not
below the rank of a Deputy Collector. This consequence is serious enough to
warrant the Court to read a compliance with the principles of natural justice
into the provision so as to ensure a fair procedure and safeguard against an unfair
recourse to its power by the State Government. The principles of natural
justice, as we have noted above, are required to be observed as a matter of
first principle when a decision – administrative, quas-judicial or judicial –
adversely affects the rights of parties. The principle of reading into the
statutory provision a requirement of complying with the principles of natural
justice is a mandate of Article 14 because it would be an anathema to a fair
procedure for the State Government to issue dictats that abrogate the financial
and administrative powers of an elected head of a local self-governing
institution without complying with the principles of natural justice. The
requirement of observing the principles of natural justice, as a matter of
first principle, must be weighed in together with the additional factors
present in the proviso to Section 48(2) that lead to the conclusion that a
decision to cease financial and administrative powers must be preceded by
adherence to a fair procedure. The first of the three indicia in the proviso is
the existence of a reason to believe on the part of the State that the
allegations do not appear to be groundless. The second indicia is the
requirement of the formation of the reason to believe that the President of a
municipality is prima facie guilty on any of the grounds mentioned in the
sub-section, resulting in the notice to show cause. Arriving at a determination
in regard to the prima facie guilt of a person, as the statute mandates, must
be upon due observance of the principles of natural justice. The third indicia
is that the notice to show cause has to contain the charges against the person.
Hence, even though the proviso to sub-section (2) of Section 48 does not
contain an explicit requirement of observing the principles of natural justice,
nonetheless such a requirement must necessarily be read into the
provision. 
The rules of natural
justice require that the person against whom action is proposed, must be made
aware of the grounds of the proposed action and must have an opportunity to
respond to the action proposed, by setting forth an explanation. Undoubtedly, the
formation of the reason to believe under the proviso to sub-section (2) is not
final having due regard to the fact that the enquiry is still to be concluded
and the cessation of financial and administrative powers is to enure during the
period when the proceedings in pursuance of the notice to show cause are still
to be concluded. A personal hearing is not a necessary ingredient of complying
with the principles of natural justice at every stage. The minimum requirement
of the principle is that the President of a municipality should be made aware
of the grounds on which the action against him is proposed in the formulation
of the charges which are issued to him, as mandated by the proviso. The person
who is sought to be proceeded against must be informed of the basis on which
the State Government proposes to entertain a reason to believe that the
allegations do not appear to be groundless and that he or she is prima facie
guilty on any of the grounds of sub-section (2) resulting in the issuance of the
notice to show cause and the proceedings in the sub-section. The period which
is allowed to the elected head to explain must be reasonable: what is a
reasonable period being dependent upon the facts and circumstances of each
case. In a case involving an element of urgency where there is a need for the
State to take an expeditious decision, the period during which an explanation
can be submitted, can be suitably tailored to meet the exigencies of the
situation. No absolute rule can be laid down in the abstract on what
constitutes a reasonable period to show cause. But the minimum requirements of
fair procedure must be fulfilled. An opportunity has to be granted. Otherwise,
the provision would be capable of grave misuse to derogate from the authority of
an elected head on arbitrary and whimsical grounds. 
The learned
Additional Advocate General submitted that (i) the judgment of the Full Bench
in Hafiz Ataullah Ansari has read something which is not a part of the proviso
to Section 48(2) into the statutory provision; and (ii) the requirement of
complying with the principles of natural justice arises where “there is
some space for it” whereas, in the present case, no space exists between
the issuance of a notice to show cause and the ceasing of financial and
administrative powers. 
We are not inclined
to accept the submission that the reading into the proviso of a requirement of
complying with the principles of natural justice would amount to the imposition
of an alien condition not contemplated by the legislature. For one thing, it is
a well settled principle of our jurisprudence that even where a statute is
silent, compliance with or adherence to natural justice must be read into the
statute as an intrinsic element of a fair procedure consistent with the mandate
of Article 14, where an administrative or quasi judicial decision has adverse
consequences for a person who is proceeded against. Reading into a statute a
requirement of complying with the principles of natural justice does not amount
to rewriting the statute or engrafting a new legislative provision. Reading
natural justice into the interstices of a statute is an exercise of an
interpretation which is necessary to render the statutory provision consistent
with the mandate of Article 14. Otherwise if a statutory provision were to be
held to authorise the taking of adverse decisions without complying with
procedural norms which are fair and reasonable, the provision would itself
become vulnerable to constitutional challenge. Hence, the principle that
natural justice should be read as a matter of interpretation into a statutory
provision where a decision which is taken has adverse consequences is connected
with the mandate of Article 14 of the Constitution. For
a Court to read a statutory provision in a manner which renders it fair, just
and reasonable, is not to re-write the statute but to make it consistent with
constitutional norms. 
Secondly, we are not
impressed with the submission that there is no space, as the Additional
Advocate General calls it, between the issuance of a notice to show cause and
the ceasing of financial and administrative powers of the President of the
municipality. The legislature has clearly not intended
that the mere issuance of a notice to show cause under sub-section (1) should
result in the ceasing of financial and administrative powers as an inexorable
consequence, as night follows day.
If the legislature so intended, it
would have provided that upon the issuance of a notice to show cause, the
financial and administrative powers of an elected President of the municipality
cease. The state legislature did not do so. Instead, it imposed a statutory
condition that it was where the State Government has reason to believe that the
allegations do not appear to be groundless and that the President is prima
facie guilty on any of the grounds of sub-section (2) resulting in the issuance
of the notice to show cause and proceedings, that he shall, from the date of
the issuance of the notice containing the charges, cease to exercise, perform
and discharge financial and administrative powers, functions and duties. It is
only when these requirements of the proviso are fulfilled that the ceasing of
financial and administrative powers takes effect by operation of law. In other
words, the ceasing of financial and administrative powers is not an automatic
consequence envisaged upon the mere issuance of a notice to show cause under
sub-section (1). For the consequence to ensue as a matter of law under the
proviso to sub-section (2), the requirements of the proviso must be
fulfilled. 
Conclusion 
We accordingly
proceed to answer the reference in the following terms: 
(I) Re Question (a):
The decision of the Full Bench in Hafiz Ataullah Ansari Vs State of U P (supra)
lays down the correct position in law. 
(II) Re Questions
(b) & (c): The cessation of financial and
administrative powers of the President does not necessarily follow merely upon
the issuance of a notice to show cause under the substantive part of Section
48(2).
The financial and administrative powers of the President shall
stand ceased if the State Government has reason to believe that (i) the
allegations do not appear to be groundless; and (ii) the President is prima
facie guilty on any of the grounds of sub-section (2) resulting in the issuance
of the notice to show cause and proceedings thereunder. The President of the
municipality will, in that event, cease to exercise, perform and discharge
financial and administrative powers, functions and duties from the date of the
issuance of the notice to show cause containing the charges. For a cessation of financial and administrative powers to
take effect, the requirements of the proviso to Section 48(2) must be fulfilled
.
Hence, proceedings for removal of a President of a municipality under Section
48(2) may take place in a given situation though the financial and
administrative powers have not ceased under the terms of the proviso. 
(III) Re Question
(d): There is no requirement under the statute that a
separate order has to be passed under the proviso to Section 48(2) when the
financial and administrative powers of the President of a municipality cease.
Such a consequence would come into being upon the requirements specified in the
proviso to Section 48(2) being fulfilled. 
(IV) Re Question
(e): An opportunity of being heard, consistent with the principles of natural
justice, before there is a cessation of the financial and administrative powers
of the President does not stand excluded by the provisions of Section 48(2). As
a matter of textual interpretation, the requirement of complying with the
principles of natural justice is an integral element of the proviso to Section
48(2). The requirements of natural justice would
warrant the grant of an opportunity to the elected head of a municipality to
respond to the notice issued by the State indicating the basis for the
formation of a reason to believe that the charges do not appear to be
groundless and that the President is prima facie guilty on any of the grounds
mentioned in sub-section (2) of Section 48. The period of notice can be
suitably molded to deal with the exigencies of the situation. 
The reference to the
Full Bench shall accordingly stand answered. The writ petition shall now be
placed before the regular Bench according to roster for disposal in light of
the questions so answered. 
December 18,
2015 
AHA 
(Dr D Y Chandrachud,
CJ) 
(Dilip Gupta,
J) 
(M K Gupta, J) 
(Suneet Kumar,
J) 

(Yashwant Varma,
J) 

2 comments on Section 48(2) when the financial and administrative powers of the President of a municipality cease.

  1. There is no requirement under the statute that a separate order has to be passed under the proviso to Section 48(2) when the financial and administrative powers of the President of a municipality cease. Such a consequence would come into being upon the requirements specified in the proviso to Section 48(2) being fulfilled.

  2. Every one knows that there is rampant corruption in the system and since most of the politicians come from criminal background in the state so more independence to them is to increase corruption in the system. This is need of hour that we may safeguard constitution values which are in danger as we are ruled by criminal elements.

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