Mohanty's daughter-in-law Barsha Sony filed an FIR against him, her mother-in-law Pritilata, her husband Rajasree and other members of the family at Balasore town police station accusing them of demanding Rs 25 lakh and other valuables.
A case has been registered against Mohanty and others under sections 498(A) (cruelty), 506 (criminal intimidation), 448 (house tresspass) and 34 (acts done by several persons in furtherance of common intention) of IPC, Balasore superintendent of police Amrita Das said.
"Allegation against me and my family is totally false and baseless. The people of Balasore know the truth. Let the law take its own course," said Mohanty, five-time MLA from Basta constituency in Balasore district.
Later, the chief minister in a statement in the assembly said Mohanty had resigned on moral ground and he had handed over the case to the Human Rights Protection Cell (HRPC) of the police.
The house plunged into turmoil as Speaker Pradip Kumar Amat did not allow opposition Congress to raise the issue in the house after the chief minister's statement, which did not pacify them.
They demanded Mohanty's arrest and accused the state government of trying to shield him by handing the case to HRPC.