(Adds Kejriwal quotes, background)
By Sruthi Gottipati
NEW DELHI, Feb 14 (Reuters) - Activist-turned-politician Arvind Kejriwal resigned as chief minister of Delhi on Friday, frustrated by obstacles put in the way of an anti-corruption bill, and immediately proposed fresh municipal elections for India's capital.
A former tax collector who heads the fledgling Aam Aadmi - or "common man" - Party (AAP), Kejriwal made a stunning debut in the city's state elections in December, tapping into public disgust with corruption and misgovernance.
The anti-graft bill would have set up an ombudsman with the power to investigate politicians and civil servants. Kejriwal had wanted it to be passed in the Delhi assembly in the coming days, but two mainstream parties thwarted him, arguing that it must be approved by the federal government first.
Kejriwal announced he was standing down after a chaotic stand-off that had paralysed the Delhi assembly through the day, with lawmakers bawling at each other and some trying to snatch the microphone of the legislature's speaker.
"The Delhi assembly should be dissolved and fresh elections should be held," he said, holding up a copy of his resignation letter at his party's headquarters as supporters outside cheered, despite a chilling downpour of rain.
Kejriwal said the Congress party and Bharatiya Janata Party had united against the bill after he had ordered a probe into India's richest man, Reliance Industries Chairman Mukesh Ambani as well as policymakers over gas pricing. Reliance said his allegations were baseless.
The AAP took power in Delhi after no party won a majority of assembly seats in December's vote, relying on 'outside support' from Congress, the Nehru-Gandhi dynasty's party which heads the national ruling coalition.
Kejriwal shook up political landscape with promises to change a rotten system, just months before a national election that is due by May. One of his first actions in office was to encourage citizens to use cellphones to record government workers who demand bribes, then call a hotline to report them.
He also eschewed guards, a motorcade, and a luxurious government bungalow - the symbols of privilege enjoyed by judges, senior civil servants and politicians in Delhi.
Kejriwal also slashed power and water prices, banned foreign supermarkets from setting up in the capital, and - even as chief minister - led an unruly protest against the police.
The AAP's meteoric rise forced the main parties, with an eye on the coming election, to adopt some of its anti-elite, anti-corruption language and measures.
The AAP plans to contest at least 350 of the 543 seats at stake in the lower house of parliament and has promised to field strong candidates against a string of high-ranking politicians Kejriwal described as corrupt. (Reporting By Sruthi Gottipati; Writing by Angus MacSwan)