(1) The Governor shall, by notification, constitute--
         (a) a Nagar Panchayat for a transitional area, that is to say, an area in transition from a rural area to an urban area;
    (b) a Municipal Council for a smaller urban area; and
         (c) a Municipal Corporation for a larger urban area, in accordance with the provisions of this Act:
     Provided that a municipality under this section may not be constituted in such urban area or part thereof as the Governor may, having regard to the size of the area and the municipal services being provided or proposed to be provided by an industrial establishment in that area and such other factors as it may deem fit, by notification, specify to be an industrial township.
     Explanation.--In this section, "a transitional area", "a smaller urban area" or "a larger urban area" means such areas 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 it may deem fit, specify by notification for the purposes of this Act.
     (2) Notwithstanding anything contained in sub-section (1), any local area, except in Scheduled Area, which was declared as a small town or a municipality under the Manipur Municipalities Act, 1976 (Manipur Act 26 of 1976), before the commencement of this Act, shall be deemed to have been declared as a transitional area or a smaller urban area, as the case may be, for the purpose of this Act.
     (3) Before issue of notification under sub-section (1) a draft of the notification is to be published indicating local limits of the area to be included or excluded from the municipality.
     (4) Any person who is ordinarily resident of the local area in respect of which the draft notification has been published under sub-section (3) may, object to the proposal contained in such notification in writing to the Deputy Commissioner within forty-five days from the date of publication of the said draft notification.
     (5) On receipt of the objection under sub-section (4), the Deputy Commissioner shall within forty-five days of the receipt of objection forward the same with his comments to the Government for its consideration.