SC says conflict-of-interest rules must be interpreted broadly in Panchayat cases

Congress had lost its influence in UP following the emergence of ‘mandal’ and ‘kamandal’ politics in the 1990s and several caste groups shifted to Samajwadi Party, BSP and BJP.

New Delhi: The Supreme Court has emphasised that legal provisions disqualifying Panchayat members who have direct or indirect financial interests in contracts must be interpreted broadly to safeguard integrity and probity in local self-governance.

A bench of Justices Manoj Misra and Vipul M Pancholi made the observation while dismissing a petition filed by a Sarpanch who was removed from her post for allegedly awarding contracts to a firm in which her husband was a partner.

The petitioner, Rekhaben Abhalbhai Bambhaniya, had challenged her removal under Section 57(1) of the Gujarat Panchayats Act, 1993. 

She was served a show cause notice on six charges, including misuse of authority by granting contracts to her husband’s firm.

The district development officer found that she had misused her position and derived indirect benefit for her family. 

The Gujarat High Court had on March 3, 2025, upheld her removal, rejecting her plea.

Assailing the order, her counsel argued that the contract was awarded through a public tender process to the lowest bidder following a resolution by the Panchayat. 

He contended there was no specific prohibition under the Act against awarding contracts to family members and that principles of natural justice were violated as certain adverse reports were not supplied to her.

The court, however, held that a narrow or restrictive interpretation of the disqualification clause under Section 30(1)(g) of the Act would defeat its very purpose. 

The provision bars a person from continuing as a member of a Panchayat if they have any direct or indirect share or interest in any contract with the Panchayat.

Referring to its earlier judgment in Virendrasing Vs Additional Commissioner (2023), the bench cautioned against overly restrictive readings of such disqualification clauses, which are meant to ensure purity of administration.

“No doubt, the petitioner’s case is that the award of contract to her husband was through a public tender but there is nothing on record to show that there was separation between her and her husband,” the bench  said. 

“In such circumstances, too restrictive an interpretation to the disqualification clause would frustrate the very object for which it is incorporated in the statute,” the bench added in its order on May 18, 2026.

The court held that, on the admitted facts, it saw no reason to interfere with the findings of the authorities and the High Court that the Sarpanch had misused her position.