While on their way to the Grand Trunk Road, Kim and the lama meet an old man who has been given land by the British Indian Government. Not only has the government made him wealthy (at least, until his sons finish spending all of his money), but he also continues to receive highly placed, important guests: "English officials—Deputy Commissioners even—turned aside from the main road to visit him" (3.57). What makes this man so important and special?
He's a big deal because he fought on the English side during the Indian Mutiny of 1857. As we discuss in our "Detailed Summary" of Chapter Three, the Indian "Mutiny" was really a rebellion on the part of British-trained Indian soldiers against British authority in India. The Revolt of 1857 cost many lives and had a huge impact on British colonial policy in India. But that history of violence doesn't really seem to affect the events of Kim all that much.
Instead, Kipling chooses to emphasize all of the financial and social benefits for the Indian soldiers who chose not to rise up against the British. This old man's honor among the English ("Deputy commissioners, even") and his property in his village demonstrate how great Kipling finds it to be an Indian soldier in the British army.
The flip side of Kipling's portrayal of the generosity and goodness of the British army and the British Indian government towards its loyal Indian soldiers is the old man's description of the Revolt as "madness" (3.131) and a "plague" (3.132). The old man cannot seem to understand why his fellow soldiers might feel that "the time of the English is accomplished" (1.140) in India, nor why the rebels might believe that it was time for the English to let their colonies have their freedom.
By portraying the relationship between this elderly Indian soldier and the British Indian State in such a positive light, and by implying that the Revolt was just a temporary "madness" that swept over India during a bad year, Kipling makes the politics of that Revolt seem totally stupid and not legitimate. He appears to insert this character into the novel specifically to say, Hey, don't worry about India's recent violent past—everything's okay now. It was just a "plague"—The sun never sets on the British Empire.
Like the Babu, this character who we are calling the Old Man Who Fought in '57 really draws attention to Kipling's imperialist politics. Check out the "In a Nutshell" section for more about Kipling's deeply, stupidly pro-colonial feelings.