Delhi will come under a spell of President's Rule and the Assembly will be kept under suspended animation with the Union Cabinet giving its nod to Lt Governor Najeeb Jung's recommendation, rejecting demands of AAP for dissolution and fresh polls.
The decision of the Cabinet, presided over by Prime Minister Manmohan Singh, will come into effect after promuglation of a notification by President Pranab Mukherjee.
It has to be then endorsed by Parliament through a resolution under Article 356 of the Constitution.
Lashing out at Jung, Arvind Kejriwal, who resigned as Delhi Chief Minister yesterday, said that the LG was "openly flouting" the decisions taken by a majority government.
"I am questioning the logic of his decision (of not recommending dissolution of the House)," Kejriwal said, adding that the constitution says that he is bound by the decision taken by the Cabinet of a majority government.
In his report to the Centre, Jung did not favour dissolution of the 70-member Delhi Assembly as recommended by the council of ministers headed by Kejriwal when it met last night and decided to quit after being defeated in the Assembly over introduction of the Jan Lokpal Bill.
The LG's move keeps the option open for any political party or a combination of parties to try and form a government in future.
Sources said Jung has conveyed to the Centre that the national capital be brought under a spell of President's rule as no party is now in a position to form an alternative government.
The Assembly elections late last year had given a split verdict with no political party getting absolute majority. AAP, which won 28 seats, had formed the government in December with the outside support of 8 MLAs of Congress. BJP has 31 MLAs in the Assembly while NDA ally SAD has one.
The LG has also sent, along with his report, Kejriwal's resignation letter.
"This decision is completely wrong because any recommendation by an elected government is normally binding (on the Lt Governor)," Kejriwal said.
"Ours was not a minority government. Before resignation, we had got passed a Money bill in the assembly. This means ours was a majority government.