Former immigration minister Phil Woolas lost his seat as an MP today after an election court ruled that he knowingly made false statements about an opponent in May's general election.
The Labour MP is to be barred from the Commons for three years and the election contest for his Oldham East and Saddleworth seat re-run.
But Mr Woolas said he would fight the ruling - the first of its kind in 99 years - and was seeking a judicial review.
The specially-convened election court had heard that Mr Woolas stirred up racial tensions in a desperate bid to retain his seat in Oldham East and Saddleworth.
His campaign team was said to have set out to "make the white folk angry" by depicting an alleged campaign by Muslims to "take Phil out".
Liberal Democrat candidate Elwyn Watkins mounted the rare legal challenge over the statements made in a pamphlet and two mock newspapers distributed in the final stages of the election.
Mr Woolas won on May 6 by just 103 votes.
After today's ruling, his solicitor, Gerald Shamash, said on his behalf that he was instructing his legal team to seek a judicial review.
"This election petition raised fundamental issues about the freedom to question and criticise politicians," he said.
"The court has found that the election leaflets put out on my behalf contained three statements which breached Section 106 of the Representation of the People Act 1983.
"The court accepted that all three statements were attacks on the petitioner's political conduct but held that the statements also related to the petitioner's personal character or conduct.
"In reaching this decision the court adopted an interpretation of conduct detailed in a case nearly 100 years ago when considering a 19th century statute.
"The court has decided that an election should be overturned and an MP should lose his seat and be incapable of being elected to the House of Commons for three years because statements which attacked a candidate's 'political conduct' were also attacks on his 'honour' and 'purity'."
It is up to Commons Speaker John Bercow to decide whether to initiate a by-election for Oldham East and Saddleworth immediately or wait for further legal proceedings.
The Speaker's office said Mr Bercow would make a statement to the Commons on Monday.
Lawyer Mr Shamash warned that today's judgment would have a chilling effect on political debate.
"Those who stand for election and participate in the democratic process must be prepared to have their political conduct and motives subjected to searching scrutiny and inquiry," he said.
"They must accept that their political character and conduct will be attacked.
"It is vital to our democracy that those who make statements about the political character and conduct of election candidates are not deterred from speaking freely for fear that they may be found to have breached electoral laws.
"This decision will inevitably chill political speech."
But, giving their judgment, Mr Justice Nigel Teare and Mr Justice Griffith Williams said Mr Woolas was guilty of illegal practices under election law.
He had attacked his opponent's personal conduct and character with statements that he courted Muslim extremists who had advocated violence against the Labour MP.
He had suggested Mr Watkins had refused to condemn such threats in pursuit of personal advantage. Both statements were untrue and Mr Woolas knew them to be, the judges said.
Mr Woolas was ordered to pay £5,000 to Mr Watkins - the sum he paid to the court when he launched the petition.
He will also have to pay the costs of the case to the petitioner.
The Independent Parliamentary Standards Authority said it would need to examine the full judgment in detail before deciding whether there were any implications for the pay and allowances received by Mr Woolas since May.
Mr Watkins said: "This is a historic victory, the first time in 99 years.
"I fought this because I believed it was really important for democracy.
"The idea that if you lie about your opponent and you know you have lied about your opponent then simply you have no part to play in democracy.
"I am proud of the judicious system which has helped me so much in this situation.
"I think this is going to be a crucial decision which will help clean up politics.
"Politics has to be better than this. Making up lies about your opponent has no part in politics."
Asked if Mr Woolas should go, Lib Dem deputy leader Simon Hughes said: "Mr Woolas has to make his own decision and the Labour Party has to make its own decision."
Speaking outside court, he said: "The judges were very clear that principle allegations made against Elwyn were untrue and the Labour candidate, and the Labour party, did not believe them to be true.
"The Labour Party have said they're going to see whether they can challenge this in other courts. They're entitled to do that.
"The matter rests with the Speaker now, and it will be the Speaker's decision whether to wait for other court proceedings or to proceed in the normal way to put the matter before Parliament and a by-election be called."
He added: "This is a very important day for the rule of law, and that's what we saw happening here.
"It's a very important day for British politics. It has a reach far wider than Oldham or this part of the world."
Mr Watkins continued: "What Mr Woolas decided was that he would do anything to keep his seat and his position of power. To my mind in a democracy that is just not acceptable.
"Everybody is in favour of proper democracy but you have certain boundaries. I was accused of pretty well every criminal act you could possibly have and it was done a couple of days before the election.
"I had no chance to respond, no chance to put my case out. It was done in a deliberately cynical way.
"I'm not the first person this has happened to in Oldham East and Saddleworth. If I hadn't brought this I wouldn't have been the last one."
The Tories accused Labour leader Ed Miliband of a "terrible misjudgment" in appointing Mr Woolas as shadow immigration minister in his first shadow cabinet.
Conservative Party chairman Sayeeda Warsi said: "This ruling exposes Ed Miliband's terrible misjudgment.
"He was fully aware of Phil Woolas's despicable and inflammatory campaign but still appointed him to a highly sensitive role on his front bench.
"After failing to act when Ken Livingstone directly contravened party rules, and dithering over whether to attend the TUC rally, Labour has another leader who'd rather duck a difficult decision than show real leadership."
Legal sources told the Press Association that details of the conduct of Mr Woolas and his election agent, Joseph Fitzpatrick, during the campaign had been passed to the Director of Public Prosecutions.
In a statement, solicitors K&L Gates, who represented Mr Watkins, said: "The judges' decision will not only cause an immediate vacancy in the seat of Oldham East and Saddleworth and give rise to a by-election, but may also give rise to a criminal inquiry into the campaign conducted by Mr Woolas, and into the role of his agent in the constituency, Joseph Fitzpatrick."
It continued: "In the first such case for 99 years, two High Court judges sitting as an election court today found in favour of Liberal Democrat, Elwyn Watkins.
"The judges confirmed that the election in May 2010 of the successful candidate for Oldham East and Saddleworth, Phil Woolas, is void because he is personally guilty of an illegal practice.
"Accordingly, Mr Woolas must immediately vacate his seat, resulting in a by-election, unless he decides to make an application for judicial review.
"Mr Woolas, the former Minister of State for Borders and Immigration in the Home Office and a former Minister of State for the Treasury, is, as a result of this judgment, now prevented from being elected to the House of Commons or holding any elected office for three years.
"Mr Watkins complained in his petition that a number of false statements were made during the election about his personal character with the intention of affecting the result of the election.
"The specially-convened election court held that all the statements of which Mr Watkins complained were false.
"Mr Woolas had made a number of allegations against Mr Watkins, including that he had attempted to woo the vote of Muslims who advocated violence and that Mr Watkins had refused to condemn extremists who advocated violence against Mr Woolas.
"The court also agreed that Mr Woolas had no reasonable grounds to believe and did not believe a number of the false allegations made in his campaign material.
"This is the first time for 99 years that an election petition has been brought under Section 106 of the Representation of the People Act 1983 (RPA) which replaced earlier statutes in similar terms dating back to 1895.
"To be successful, the petitioner must prove to a criminal standard (i.e. beyond all reasonable doubt) that false statements have been published in relation to his personal character or conduct (not his political views) and that the respondent did not have reasonable grounds for believing the statements to be true and did not believe them to be true."
In a later statement Mr Watkins said: "This verdict is a historic victory for the people of Oldham East and Saddleworth, a victory for fair play and a victory for clean politics.
"Anyone who knowingly lies to the voters or looks to set constituent against constituent has no place in a democracy.
"I hope this judgment makes it very clear that if you deceive your constituents you should be kicked out of Parliament."
Speaking after the ruling Mr Woolas said: "I would like to very much thank my team who have supported me throughout this period and in the election, and the legal team in the last few weeks who have done a superb job.
"You will have heard in the court this afternoon we are applying for a judicial review of this decision and we will be doing that as soon as we leave this building.
"In light of that ongoing action I won't be saying anything on the case today, I will of course be doing so in the future."