The particulars given in the application form to residential status, character, criminal records, educational qualifications, references and is not bound by those details only and if they come across any facts relevant that may bar issue of passport, they may refer the same to PPO.
Police do their duty as prescribed to them when they receive such request from Passport Issuing authority. You need not perturbed by the fact of Police verification. In most cases, they verify without even telling the Passport applicant. They may issue a notice to visit their Police Station with certain documents and ask you to sign a register. That's all. However, if there is a record with them in the name of the applicant and/or the references have given a negative report, such details may go into the Verification Report and Passport Authorities decide whether to issue Passport or not.