"I have resigned on moral grounds. I am innocent and a fair probe should take place," said Sao, a Congress legislator, to reporters after submitting his resignation to Chief Minister Hemant Soren.
Police in Hazaribagh had recently arrested five members of a small Maoist group. The arrested Maoists, according to police sources, admitted that the group was raised with Sao's support.
The opposition parties had demanded dismissal of the minister. Sao had himself demanded a Central Bureau of Investigation probe into the allegations, but the state ordered a CID probe.
The Bharatiya Janata Party has now demanded removal of two ministers whose name figured in connection with Ranjit Kholi alias Rakibul, husband of national shooter Tara Sahdeo, who according to her, concealed the fact he was Muslim and and forced her to change her religion after marriage.