Bhaini was missing since Saturday last. His body was found yesterday and some of his belongings were found from near the Bhakra Canal at Anandpur Sahib, they said.
During postmortem, doctors found injury marks on the head and suspected that Bhaini was killed and the body dumped in the canal, they said.
The family of the leader has alleged that he was murdered.
An FIR was today registered at Anandpur Sahib police station under relevant sections, including Section 302 (murder) of the IPC against unidentified persons, Senior Superintendent of Police Rupnagar, Varinderpal Singh said.
Supporters of Bhaini have formed a nine-member committee to follow the murder case, his family members said.