Ok for ppl who asked questions, u get all these answers when u apply for license you can clarify and i am sure some traffic police site has it mentioned, well anyways.
1. Is it mandatory to have all the documents while driving a vehicle (car or bike)? Please specify what documents are supposed to be carried around?
Ans: you need to have Bike/car Registration Certificate (RC), Valid Insurance and Driving License (or smart card with all the info) without License and insurance you are as good as a murderer in a race car.
2. If the driver has just the driving license and is wearing a helmet how much does he need to shell as fine?
Ans: The fine varies from State to state as these rulings are defined by state traffic police or high court until challanged, in most cases bike would be impounded and can be registered as stolen. If bike papers are not on your name they should be either on your fathers name as on license or you should have NOC from the last owner.
3. If a police man stops the driver and gets hurt/killed in the attempt, how does the government takes it.
Ans: What do u think? Obviously get arrested and ready for trial.
4. Is it mandatory to have insurance while driving in India?
Ans: Yes!
5. If a vehicle doesn't have insurance how much fine is charged?
Ans: list of various fines in karanataka Bangalore City Traffic Police
ideally it should be a court fine where judge decides.
6. Is State Police authorized to check helmet/documents etc from commuters?
Ans: No only Traffic Cops that too above the level of constable. If you mean regular state police just ask them for challan they do not have book and cannot fine you simple!
7. What is the importance of Traffic Police if State Police can do all this work?
Ans: Already mentioned in question 6, more or less irrelevant question, you answered it yourself 
8. For checking of this sort who gives the orders?
Ans: generally by traffic commissioner or court you can see stamp on your challan. Sometimes state govt give orders to commissioner for a check