(1) Subject to the provisions of section 349 the Governor may declare, by notification that any Panchayat area constituted under the Karnataka Panchayat Raj Act, 1993 (Karnataka Act 14 of 1993) shall with effect from the date to be specified in such notification be transitional area constituted under section 349 of this Act.

(2) The provisions of the Karnataka Panchayat Raj Act, 1993 applicableto such Panchayat area shall not apply to any local area declared as a transitional area under sub-section (1), with effect from the date specified in the declaration:

Provided that any appointment, notification, notice, tax, order, scheme, licence, permission, rule, bye-law or form made or issued or imposed under the said Act in respect of such Panchayat area which were in force as applicable immediately before the date specified under sub-section (1) shall continue in force and be deemed to have been made, issued or imposed under the provisions of this Act unless and until it is superseded by any appointment, notification, notice, tax, order, scheme, licence, permission, rule, bye-law or form made or issued or imposed under this Act.

(3) With effect from the date of declaration of any area as a transitionalarea under sub-section (1) the following consequences shall, ensue, namely:--

(a) the body functioning as a Grama Panchayat under KarnatakaPanchayat Raj Act, 1993, immediately before the date of the said declaration in respect of the said area shall become a body competent to exercise the powers and perform the duties conferred by the provisions of the Act on a Town Panchayat in respect of the said area until Town Panchayat is duly constituted for the area within the jurisdiction of such body under the provisions of this Act;

(b) the members of the Grama Panchayat holding office as suchimmediately before the said date shall become councillors of the Town Panchayat;

(c) the Adhyaksha of the said Grama Panchayat shall become thepresident of the Town Panchayat and discharge duties and perform functions of the President under this Act and Upadhyaksha of the said Grama Panchayat shall become the Vice-President of the said Town Panchayat under this Act;

(d) where, under the provisions of section 8 or section 268 of theKarnataka Panchayat Raj Act, 1993 either an administrator or an officer has been appointed, to exercise the powers and perform the duties of the Grama Panchayat then, such administrator or officer shall be deemed to be an administrator appointed under section 315;

(e) the unexpended balance of the Grama Panchayat fund andproperty (including arrears of rates, taxes and fees) belonging to the said Grama Panchayat and all rights and powers which prior to the said declaration vested in the Grama Panchayat shall, subject to all charges and liabilities affecting the same, vest in the Town Panchayat;

(f) any appointment, notification, notice, tax, order, scheme, licence, permission, rule, bye-law or form, made or issued or imposed under any other law in respect of such Grama Panchayat shall continue in force and be deemed to have been made, issued or imposed under the provisions of this Act, unless and until it is superseded by any appointment, notification, notice, tax, order, scheme, licence, permission, rule, bye-law or form made or issued or imposed under this Act;

(g) all budget estimates, assessment lists, valuation or measurements made or authenticated under the Karnataka Panchayat Raj Act, 1993 immediately before the said date shall be deemed to have been made or authenticated under this Act;

(h) 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 or under the Act;

(i) all proceedings pending prior to the said declaration before theGrama Panchayat shall be continued by the Town Panchayat;

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

(k) all prosecutions instituted by or on behalf of the Grama Panchayatand all suits or other legal proceedings instituted by or against 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 such area had been included in the transitional area of the Town Panchayat when such prosecutions, suits or proceedings were instituted.

(l) 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 provisions of this Act, receive salaries and allowances and be subject to the conditions of service to which they were entitled 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 services as if the Town Panchayat in the employment of which he was, had not ceased to exist.

(4) A Town Panchayat shall be duly constituted for the transitional areaunder this Act, within a period of six months from the date of declaration referred to in sub-section (1) and from the date of first meeting of the Town Panchayat as so constituted the body exercising the powers and performing the duties of the Town Panchayat shall stand dissolved.

(5) The properties, rights and liabilities of the Grama Panchayat of aPanchayat area declared as a transitional area under sub-section (1) shall vest in the Town Panchayat of the said transitional area with effect from the date specified in the notification.