Case Study: Madras High Court Quashes Section 168 IPC Charges in S. Balasundram v. State (2025)

Case

S. Balasundram v. State represented by The Sub-Inspector of Police
Crl. O.P. No. 25819/2017

Court and Date

Hon’ble Mr. Justice D. Bharatha Chakravarthy, Madras High Court
Date of Order: 25 June 2025

Relevant Law

• Section 168, Indian Penal Code (IPC) – Prohibits a public servant from engaging in trade if legally bound not to do so.
• Industrial Employment (Standing Orders) Act, 1946 – Governs terms of service through certified Standing Orders.
• Conduct, Discipline and Appeal Rules, 2016 (for reference).

Background

S. Balasundram, a public servant employed with Andrew Yule & Company Ltd., a Government of India undertaking, was implicated during a CBI investigation into alleged PF irregularities at a private company (Adyar Ananda Bhavan).
Although the primary accused were cleared of bribery charges, investigators found that Balasundram had been acting as a private PF and ESI consultant to several firms while being in government service.
A Final Report was filed accusing him of violating Section 168 IPC by engaging in profit-making activities while holding public office.

Legal Issue

Whether a public servant employed in a government undertaking can be prosecuted under Section 168 IPC for offering private consultancy services (PF & ESI) during service.

Key Legal Findings

• Standing Orders applied, not Conduct Rules:
  Balasundram was governed by certified Standing Orders for his unit, not general Conduct Rules.
• Standing Orders did not impose an absolute prohibition:
  They only required prior written permission for outside employment, which cannot be refused if it does not affect official duties.
• “Consultancy” is not “trade” under Section 168 IPC:
  • Section 168 penalises public servants legally bound not to engage in “trade” who do so.
  • The term “trade” means exchange of goods for profit; consultancy involves rendering professional services, not trade.
• No explicit legal prohibition existed:
  Without a legal bar, consultancy cannot amount to an offence; at most it triggers an obligation to seek prior permission.
• Conduct Rules mention “trade”, “business”, “employment” distinctly:
  This distinction reinforces that consultancy does not fall under “trade”.

“Sporadic consultancy which doesn’t interfere with public duty is not illegal unless explicitly prohibited by law.”
— Madras High Court, Para 19

Judgment

• The Court quashed the Final Report filed against S. Balasundram.
• It held that:
  • His consultancy work did not amount to ‘trade’ within the meaning of Section 168 IPC.
  • There was no absolute legal bar under the applicable Standing Orders.
  • At most, he was required to obtain prior permission, not to abstain entirely.
• Petition allowed and all proceedings against him were dropped.

Conclusion

The Madras High Court clarified that providing professional consultancy services while in public employment is not “trade” under Section 168 IPC. If the Standing Orders do not outright prohibit such work, and if it does not interfere with official duties, it cannot attract criminal liability—although prior permission is needed.

Key Learning

• Section 168 IPC applies only to “trade”, not consultancy or professional services.
• Standing Orders permitting outside work with prior permission override general Conduct Rules.
• Public servants are not criminally liable for consultancy unless explicitly barred by law.
• Sporadic consultancy that does not affect official duties does not constitute misconduct.

Download the PDF copy of this Case:

Join the community that’s changing the way businesses handle compliance in India.