There are a very large number of Supreme Court judgments on Section 197 of the Criminal Procedure Code with regard to the requirement of the sanction for prosecution. In fact, in my book [Prevention of Corruption Act, Second Edition (2009), appx. 2250 pages, published by LexisNexis, New Delhi (ISBN: 978-81-8038-592-6)], I have spent more than 100 pages on this section discussing various judgments.
It is not possible to quote Supreme Court judgments in a general manner, in the absence of a specific issue.
However, with regard to your query, let me point out generally that sanction for prosecution under Section 197 of Cr.P.C. is required only in respect of those public servants who are removable by the Government (Central or State). If a public servant can be removed from his post by an authority lower than the Government itself, then sanction for prosecution under Section 197 is not needed (except in some situations, as mentioned in the section itself).
Secondly, even for such higher level of public servants, sanction for prosecution is needed only for an offence which is alleged to have been committed by him while acting or purporting to act in the discharge of his official duty. For other types of offences, such sanction would not be required.
In most of the states, a Police Inspector is generally appointed by an authority lower than the Government. For example, in Delhi Police, an Inspector is appointed by Additional Commissioner of Police, as per Section 12 of the Delhi Police Act. So, if there is a similar provision in your state, then sanction for prosecution under the main provision [sub-section (1)] of Section 197 Cr.P.C. is not needed for a Police Inspector.
However, there is another provision under sub-section (3) of Section 197, under which the State Government has the power to issue a Notification requiring sanction for prosecution under Section 197 even for lower level officers / members of a police force. For example, if I remember correctly, Maharashtra Government had issued such a notification that required such sanction for all members of Maharashtra Police. So, if a similar notification has been issued by your State Government, then sanction for prosecution of a Police Inspector may be needed under this section for an offence which is alleged to have been committed by him while acting or purporting to act in the discharge of his official duty.
Dr. Ashok Dhamija is a New Delhi based Supreme Court Advocate and author of law books. Read more about him by clicking here. List of his Forum Replies. List of his other articles. List of his Quora Answers. List of his YouTube Videos.