Any local area consisting of one or more revenue villages in respect of which a Grama Panchayat has been constituted under the Karnataka Panchayat Raj Act, 1993 may be included in a transitional area by a notification issued in accordance with the provisions of section 4 and notwithstanding anything contained in this Act or in the Karnataka Panchayat Raj Act, 1993 but subject to the provisions of section 4 of this Act, with effect from the date on which such area is included in a transitional area, the following consequences shall ensue, namely:--

(a) the Grama Panchayat shall cease to exist and the Zilla Panchayat orTaluk Panchayat within the jurisdiction of which such area is situated shall cease to have jurisdiction over such area;

(b) the un-expended balance of the Grama Panchayat fund and theproperty (including arrears of rates, taxes and fees) belonging to the Grama Panchayat; and all rights and powers which, prior to such notification vested in the Grama Panchayat shall subject to all charges and liabilities affecting the same, vest in the Town Panchayat of the transitional area;

(c) any appointment, notification, notice, tax, order, scheme, license, permission, rule, bye-law or form made, issued, imposed or granted under the Karnataka Panchayat Raj Act, 1993 immediately before the said date in respect of the said local area shall continue in force and be deemed to have been made, issued, imposed or granted under this Act until it is superseded or modified by any appointment, notification, notice, tax, order, scheme, license, permission, rule, bye-law, or form made, issued, imposed or granted under this Act;

(d) all budget estimates, assessments, assessment lists, valuation ormeasurements, made or authenticated under the Karnataka Panchayat Raj Act, 1993, immediately before the said date in respect of the said local area shall be deemed to have been made or authenticated under this Act;

(e) all debts and obligations incurred and all contracts made by or onbehalf of the Grama Panchayat immediately before the said date and subsisting on the said date shall be deemed to have been incurred and made by the Town Panchayat in exercise of the powers conferred on it by this Act;

(f) all officers and servants in the employment of the Grama Panchayatimmediately before the said date shall become officers and servants of the Town Panchayat under this Act and shall, until other provision is made in accordance with the provision of this Act receive salaries and allowances and be subject to the conditions of service to which they were entitled or subject immediately before such date:

Provided that it shall be competent to the Town Panchayat subject to the previous sanction of the Government to discontinue the services of any officer or servant, who, in its opinion, is not necessary or suitable for the requirements of the service under the Town Panchayat, after giving such officer or servant such notice as is required to be given by the terms of his employment and every officer or servant whose services are dispensed with shall be entitled to such leave, pension, provident fund and gratuity as he would have been entitled to take or receive on being invalidated out of service, as if the Grama Panchayat in the employment of which he was, had not ceased to exist;

(g) all proceedings pending on the said date before the Grama Panchayatshall be deemed to be transferred to and shall be continued before the Town Panchayat;

(h) all appeals pending before any authority shall, so far as may bepracticable, be disposed of as if the said local area had been included in the transitional area when they were filed;

(i) all prosecutions instituted by or on behalf of the Grama Panchayat and all suits or other legal proceedings instituted by or against the Grama Panchayat or any officer of the Grama Panchayat pending on the said date shall be continued by or against the Town Panchayat as if the said local area had been included in the transitional area when such prosecutions, suits or proceedings were instituted;

(j) all arrears of rates, taxes and fees vesting in the Town Panchayat shall, notwithstanding that such rates and fees cannot be levied under this Act, be recoverable in the same manner as a tax recoverable under this Act;

(k) until the reconstitution of the Town Panchayat in accordance with theprovisions of this Act, notwithstanding anything to the contrary contained in this Act, such number ¹ [of persons] ordinarily resident in the local area included in the transitional area who are nominated by the Government shall be additional councillors of the Town Panchayat.

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1. Substituted by Act 22 of 2000 w.e.f. 29.11.2000.