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 Delhi Set-up had recommended that a fresh law governing NDMC should be passed by the Parliament for proper organization and functioning of the New Delhi Municipal Council. Consequent upon enforcement of Constitution (Seventy Fourth Amendment) Act, several provisions in Punjab Municipal Act, 1911 had to be brought in tune with Part IXA of the Constitution before 31st May, 1994. Furthermore, there were several major differences between various functional regimes prescribed under the old law governing NDMC in comparison to the Delhi Municipal Corporation Act, 1957. It was generally recognized that there was need for a greater measure of commonality in the procedure adopted by the Municipal Corporation of Delhi and the New Delhi Municipal Council in matters relating to taxation, revenue, budgeting, contracts, accounts and audits, streets and sanitation, public health, public safety and suppression of nuisances etc.

The following were the most important objectives. 
i. To Provide New Delhi Municipal Council area with a new legislation repealing the Punjab Municipal Act, 1911. 
ii. To bring uniformity as far as possible in building regulations, audit revenue and budgetary provisions in the Municipal Corporation of Delhi and New Delhi Municipal area; is marginal. 
iii. To harmonize the law with the Constitution (Seventy-fourth Amendment) Act, 1992 with necessary exemptions and modifications under article 243R, 243T, 243U and 243V of the Constitution wherever departure has had to be made from the constitutional provisions. The provisionsof Constitution (Seventy-fourth Amendment) Act, 1992 were brought into force with effect from 1st June, 1993 and the laws governing municipalities all over the country had to be harmonized in consonance with the provisions of Part IXA of the Constitution by 31st May, 1994. Consequently an Ordinance was promulgated on 25th May, 1994.

     The National Capital Territory of Delhi (NCT) comprises three local bodies, MCD, NDMC and Cantonment Board. The Municipal Corporation of Delhi comprises approximately 96 per cent of the area and population of the Union Territory of Delhi. The Delhi Municipal Corporation Act, 1957 was amended in August, 1994 to bring it in tune with the Constitutional provisions of Part IXA. In respect of New Delhi Municipal Council, which consists of only 3 per cent of the area and 3 per cent of the population of National Capital Territory of Delhi, it was felt that a different kind of legal system be structured taking into account special characteristics of the New Delhi Municipal Council area. 
Following are the reasons. 
i. The New Delhi Municipal Council area comprises of the territory that has been described as Lutyen’s Delhi and which has historically come to be regarded as the seat of central authority in Union of India. 
ii. It comprises of important buildings like Rashtrapati Bhawan, Parliament House, Supreme Court, North and South Blocks and buildings abutting Central Vista and also all the diplomatic missions which function as territorial entities under the sovereign jurisdiction of their Flag States. 
iii. The Government of India is nearly the sole landowner and also owns about eighty percent of the buildings in the New Delhi Municipal Council area. Private ownership of property in this area. Private ownership of property in this area is marginal. 
iv. Efficient function of the Municipal services in this area is critical for the internal image of the country and is a factor which has an important bearing on the functioning of the Government apparatus itself.
v. Historically, this area has enjoyed a system of Local Government very different from other parts of the National Capital Territory. On account of these special characteristics, it was felt that any scheme for the governance of this area based on conventional pattern of representative local self-government, would be unworkable and out of place since the pre-eminent character of this area is that of the seat of the Central Government.

     Constituion of the Council The Constitution of Council has been defined under chapter-2 of NDMC Act - 1994. The Council shall consist of the following members viz. 
1.  (a) A Chairperson, from amongst the officers, of the Central Government or the Government, of or above the rank of Joint Secretary to the Government of India to be appointed by the Central Government in consultation with the Chief Minister of Delhi;   (b) Two members of Legislative Assembly of Delhi representing constituencies, which comprise wholly or partly the New Delhi area;   (c) Five members from amongst the officers of the Central Government or the Government or their undertakings, to be nominated by the Central Government; and   (d) Four members to be nominated by the Central Government in consultation with the Chief Minister of Delhi to represent from amongst lawyers, doctors, chartered accountants, engineers, business and financial consultants, intellectuals, traders, labourers, social workers including social-scientists, artists, media persons, sports persons and any other class of persons as may be specified by the Central Government in this behalf. 
2. Section 4(1)(e) of the existing NDMC Act, 1994 r/w NDMC (Amendeent) Act, 2011, vide which it is stated that the sitting MP of New Delhi Constituency is a member of the Council. 
3. Section 4(3)(b) of the Act, whcih state that 'two members beloning to the Scheduled Casts, out of whcih one member shall be from the members nominated under clause (d) of sub section (1). 
4. The Central Government shall nominate, in consultation with the Chief Minister of Delhi, a Vice-Chairperson from amongst the members specified in clauses (b) and (d) of sub-section (1). Section 4(1,2&3) of the NDMC Act - 1994}

     The Council unless sooner dissolved under section - 398 or any other law for the time being in force, shall continue for five years from the date appointed for its first meeting and no longer. {Section 5(1) of the NDMC Act - 1994} A Bill No. 55 of 1994 was introduced in the Parliament and the New Delhi Municipal Council Act was passed by the Parliament. After the Bill passed by the Parliament, consent received of the President of India, the Council was constituted on the 10th November, 1995. The first meeting of the Council took place on 23rd December, 1995, under the chairmanship of the Lt. Governor, Delhi (the Administrator of Delhi).