Mohanty and his wife, who were in judicial custody in Balasore jail since March 30, were freed after Sub-Divisional Judicial Magistrate Ranjan Kumar Sutar granted them bail after furnishing security of Rs 10,000 each and surety.
There was tight security near the court and jail as a large number of people, including supporters of Mohanty, had gathered at both places.
Soon after the court granted bail to Mohanty and his wife, their daughter-in-law Barsa Swony Choudhury told reporters that she apprehended threat to her life as the former minister was a powerful person.
Barsa, who had married the BJD leader's son Raja Shree in June last year had alleged that his family demanded Rs 25 lakh and a luxury vehicle as dowry. She had also accused her husband of having extra-marital relations.
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On March 15, Mohanty, MLA from Basta constituency for the fifth consecutive term and a minister since 2005, had resigned from the Naveen Patnaik ministry and gone into hiding with his wife.
A case had been registered against Mohanty, his wife, son, daughter Rupashree and son-in-law Subhendu Madhual under section 498(A) (husband or relative of husband of a woman subjecting her to cruelty), 506 (criminal intimidation), 448 (trespass) and 34 (common intention) of IPC and section 4 of Dowry Prohibition Act.
Raja Shree was arrested from near Cuttack on March 17 and is in jail. The former minister's daughter and son-in-law were yet to be traced.