ORDER Anaparthy Village of East Godavari District had a Gram Panchayat constituted under the A.P. Panchayat Raj Act, 1994 (for short 'the P.R. Act'). It has grown in size and activity. Therefore, proposals were mooted for upgrading it into Nagar Panchayat. This required the steps of denotification of the Gram Panchayat under Section 3 of the P.R. Act and a consequential notification under Section 2(42a) of the AP. Municipalities Act, 1965 (for short 'the Act). While the notification under Section 3 of the P.R. Act draws a curtain on the Gram Panchayat, the notification under Section 2(42a) of the Act would bring into existence, what is known as "transitional or smaller urban area". On such notification being published, the consequences provided for under Section 2-A of the Act ensue. 2. In respect of Anaparthy Gram Panchayat, a notification under Section 3 of the P.R.Act was published in G.O.Ms. NO.216, dated 07.06.2008. On the same day, the Government in Municipal Administration Department published a notification under Section 2(42a) of the Act in G.O.Ms.NoA02. Through another order passed on the same date i.e., G.O.Ms. NoA03, the Government appointed a special officer for the newly constituted Nagar Panchayat. 3. W.P.No.12147 of 2008 is filed by a Member of the erstwhile Anaparthy Gram Panchayat, challenging the notifications referred to above, issued by the Government. W.P.No.20643 of 2008 is filed by two residents of the same village. 4. The contention of the petitioners is that the parameters prescribed by the Legislature for constituting a Nagar Panchayat do not exist and still, the notifications were issued. They harp upon the percentage of employment' in nonagricultural activities (PENA), which according to them is 20%, which is far below than the minimum requirement under the Rules issued in G.O.Ms.No.39, Municipal Administration Department, dated 03.02.1995 (for short 'the Rules') viz., 50%. It is also urged that other factors were not properly verified and the entire exercise was undertaken in undue haste. 5. The authorities of the Panchayat Raj Department, on the one hand, and the Municipal Administration Department, on the other, have filed separate counter affidavits. They state that the prescribed procedure was duly followed and it was only on finding that the prescribed factors are satisfied that the notifications were issued. 6. 5. The authorities of the Panchayat Raj Department, on the one hand, and the Municipal Administration Department, on the other, have filed separate counter affidavits. They state that the prescribed procedure was duly followed and it was only on finding that the prescribed factors are satisfied that the notifications were issued. 6. Sri Gani Reddy and Sri Sat yam Reddy, learned counsel appearing for the petitioners in the respective writ petitions, submit that not only Section 2(42a) of the Act stipulates the requirements to be fulfilled before an existing Gram Panchayat is upgraded into Nagar Panchayat, but also the Government had framed the Rules, wherein the parameters, in terms of figures, are prescribed. They contend that even if one goes by the facts and figures furnished by the respondents in their counter affidavits, it emerges that no proper exercise was undertaken as contemplated under law. 7. Learned Government Pleader for Municipal Administration and the learned Government Pleader for Panchayat Raj, on the other hand, submit that the notifications were issued only after ensuring proper compliance with the prescribed norms. It is urged that there existed a small discrepancy as to PENA and further steps were taken only after the verification of record. 8. The petitioners do not dispute the power of the Government either to de-notify an existing Gram Panchayat or to upgrade the same into a Nagar Panchayat. The only controversy is as to whether the necessary parameters prescribed by the Government for undertaking such exercise exist in the instant case. 9. Section 3 of the P.R. Act confers power on the Government to de-notify a Gram Panchayat. The power is almost unbridled and no parameters are prescribed for exercise thereof. Obviously it is treated as a prelude either to upgrade an existing gram panchayat or to re-constitute it. Before an erstwhile Gram Panchayat is upgraded into a Nagar Panchayat, it is essential. that a notification under Section 2(42a) of the Act is issued. Such a notification would bring about what is known as "transitional or smaller urban area" and once the notification is issued, by operation of Section 2-A of the Act, it becomes a Nagar Panchayat. Before an erstwhile Gram Panchayat is upgraded into a Nagar Panchayat, it is essential. that a notification under Section 2(42a) of the Act is issued. Such a notification would bring about what is known as "transitional or smaller urban area" and once the notification is issued, by operation of Section 2-A of the Act, it becomes a Nagar Panchayat. Sections 2(42a) and 2-A of the Act read as under: 2(42a) 'transitional area' or 'a smaller urban area' means such area as the Governor may, having regard to the population of the area, the density of the population therein, the revenue generated for local administration, the percentage of employment in nonagricultural activities, the economic importance or such other factors as he may deem fit, specify by public notification for the purposes of this Act, subject to such rules as may be made in this behalf. 2-A Constitution of Nagar panchayats:- (1) Where an area is specified as a transitional area under Clause (42-A) of Section 2, a Nagar Panchayat shall be deemed to have been constituted for such transitional area. (2) The provisions of this Act shall apply to a Nagar Panchayat deemed to have been constituted under this section as they apply to a Municipality and to facilitate such application a Nagar Panchayat shall be deemed to be a Municipality. 10. From a perusal of Section 2(42a) of the Act, it becomes clear that an area can be declared or notified as transitional or smaller urban area, only on being satisfied that the requirements as to (a) population (b) density of population (c) revenue generated for local administration (d) PENA and (e) economic importance, are fulfilled. While the sub-section makes a reference to these parameters, in general terms, the actual figures are required to be prescribed by the Rules. It was in this context that the Government issued the Rules, which are very brief. Rule (2) thereof stipulates the parameters for constitution of Nagar Panchayat, which reads as under: 2. Criteria for constitution of Nagar panchayts:- An area may be notified as Transitional Area (Nagar Panchayat) under Clause (42-A) of Section 2 of the Andhra Pradesh Municipalities Act, 1965 if the following criteria is satisfied. (a) Populatin 25000 to 40000 (b) Density of population per sq. Criteria for constitution of Nagar panchayts:- An area may be notified as Transitional Area (Nagar Panchayat) under Clause (42-A) of Section 2 of the Andhra Pradesh Municipalities Act, 1965 if the following criteria is satisfied. (a) Populatin 25000 to 40000 (b) Density of population per sq. K.M. 1000 and above Provided that a local area with a lesser density of population may also be considered if it has acquired urban characteristics (c) Revenue Rs.40.00 lakhs and more per annum Provided that a local area with a lesser income may also be considered if it has acquired urban characteristics (d) Percentage of employment in Non-Agricultural activities 0% and above (e) Economic importance Availability of market facilities and potentialities to attract industries (f) Other Factors Local area acquiring urban characteristics Therefore, it needs to be seen as to whether these requirements are fulfilled vis-a-vis the erstwhile Anaparthy Gram Panchayat. substantial industrial and commercial development. It is also pleaded that most of the residents are dependant upon agricultural activities. It is mentioned that the District Collector reported to the Commissioner of Municipal Administration that the PENA is only 21 % and still, the notifications were issued. 11. In the counter affidavit filed by the Assistant Secretary to Government in Panchayat Raj Department, the following facts and figures are mentioned: (a) Population (b) Density of population as per sq.km (c) Revenue (d) Percentage of employment in nonagriculture activities (e) Economic importance (f) Other factories 25000 to 40000 1000 and above. Provided that a local area with a large density of population may also be considered if it has acquired urban characterstics Rs.40.00 Lakhs and more per annum provided that a local area with a lesser income may also be considered if it has acquired urban characteristscs 50% and above Availability of market facilities and potentialities to attract industries Local area acquiring urban characteristics 25533 1413 per Sq.Km a) Land Revenue:: Rs.8,13999/b) NALa ::1,40,000/c) Normal income RS.45,95,000/d)Total income Rs. 55,48,999/- 21% Rice mills, poultries, ITC Ltd., Ammireddy Oils, Brick industries, Egg exports, steel industries, Engg. Works and transport companies Anaparthi Gr. Pt. 55,48,999/- 21% Rice mills, poultries, ITC Ltd., Ammireddy Oils, Brick industries, Egg exports, steel industries, Engg. Works and transport companies Anaparthi Gr. Pt. is specially developed economically is, business, agriculture & industries also there is a railway station in Anaparthy village and some express trains are also stopped, also having commercial banks, co-operative banks and community health center, private eye hospitals and other private hospitals and also having educational institutional i.e., private Degree colleges and 3 Government High Schools. However, in the counter affidavit filed by the Assistant Secretary of Municipal and Urban Development Department, reference is made to the facts and figures said to have been submitted by the Divisional Panchayat Officer, which put the PENA at 75%. Learned Government Pleader for Municipal Administration has made available to this Court the entire record, in view of the discrepancy in the facts and figures. A perusal of the same discloses that after the procedure for up gradation of the Gram Panchayat was initiated, the Divisional Panchayat Officer addressed a letter, dated 05.05.2008 to the District Panchayat Officer, wherein he mentioned PENA at 75%. The latter, in turn, repeated the same figures in his communication, dated 12.05.2008, to the Commissioner of Panchayat Raj. 12. On receipt of the report from the Panchayat Raj Department, the Commissioner and Director of Municipal Administration started exercise in his Department. He in turn addressed a letter to the District Collector to furnish the remarks on the proposals. When the District Collector addressed the Divisional Panchayat Officer to furnish the facts and figures, the latter addressed a letter, dated 18.05.2008, wherein he mentioned the PENA at 21 %. The District Collector had mentioned the same in his report, dated 18.08.2008, submitted to the Commissioner and Director of Municipal Administration. The note file discloses that at one stage, doubt was expressed as to the feasibility, in view of the figures furnished by the District Collector, whereas the proposal was cleared, by making a reference to the facts furnished by the Divisional Panchayat Officer in his communication, dated 05.05.2008. 13. From the above, it becomes clear that the Divisional Panchayat Officer himself has furnished conflicting facts and figures on an important parameter. It is not as if there was much gap between the two communications. 13. From the above, it becomes clear that the Divisional Panchayat Officer himself has furnished conflicting facts and figures on an important parameter. It is not as if there was much gap between the two communications. On 05.05.2008, in his communication to the District Panchayat Officer, he mentioned PENA at 75%, whereas hardly within two weeks, he slashed down the same to 21 %. There is some discrepancy about population and other figures also. 14. It hardly needs any mention that howsoever attractive the up gradation of a Gram Panchayat into a Nagar Panchayat or Municipality may be, it would have its own impact upon the lives of citizens in terms of tax regime, their freedom to undertake constructions etc. It is not without reason that the Legislature insisted that the PENA must be not less than 50% for a Gram Panchayat to be upgraded as Nagar Panchayat. Even if a particular Gram Panchayat is flourishing and large in size, it cannot be converted into a Nagar Panchayat, in case, the population is predominately dependant upon agriculture. The upgradation of a Gram Panchayat into a municipality would have its own adverse effect upon agriculture. So many restrictions come to be imposed and the culture brought about in the habitat would not only discourage but also, in a way, make it impossible for the agriculture to be carried on in the normal course. Therefore, the respondents ought to have been more careful and certain in ensuring the fulfillment of the parameters, before the Gram Panchayat was upgraded into Nagar Panchayat. Since it has emerged that the facts and figures on an important aspect were totally at variance, the notifications cannot be sustained. 15. The writ petitions are accordingly allowed and the impugned notifications are set aside. It is, however, made clear that in case, the respondents intend to repeat the exercise, they shall undertake thorough verification of the relevant parameters and the record must reflect the same. There shall be no order as to costs.