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This section prescribes punishment for public servants who engage in trade unlawfully. It says that whoever, being a public servant, and by virtue of being such a servant is legally bound not engage in trade, engages in trade, shall be punished with simple imprisonment for a term extending up to one year, or with fine, or with both.

The section applies only when a public servant is bound by some law not to engage in trade, and he does engage in trade. In cases where there is no such prohibition and a public servant does engage in trade, he is not guilty under this section. A punishment of imprisonment under this section can never be rigorous.

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The main reasons for the enactment of this section are that public servants should be completely devoted to their duties and job, and they should not obtain any advantage unfairly by exercising their influence as public servants. The expression ‘legally bound’ has been defined in section 43 of the Code.

In State v. Mahesh Kumar Dhirajlal Thakkar, the accused, a tracer in the soil conservation office, took leave and joined the railways as an apprentice trainee on a stipend. During the time he received the stipend, he also continued to receive his salary from the soil conservation office from where he ultimately resigned, and joined the railways where by that time he had already completed training.

On the question as to whether receiving the training and stipend amounted to engagement in trade, the Supreme Court held that it was not so, as receiving stipend during training was not an employment with the railways.

In State of Maharashtra v. Chandrakant Solanki, the Supreme Court ruled that engagement as agent of an insurance company on commission basis does not amount to engaging in trade within the meaning of section 168 of the Code. The word ‘commission’ does not include profits because commission is an amount settled beforehand which goes to the person who brings business to the company whereas profits are whatever the company finally earns after deducting all expenditure and it goes to the company.

Thus, where the accused was working as Inspector on probation in National Insurance Company, engaged himself by running two agencies with two insurance companies and received agent’s commission, it cannot be said that he engaged himself in trade.

The offence under this section is non-cognizable, bailable and non-compoundable, and is triable by magistrate of the first class.

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