The Special Court on Tuesday authorised the Department of Money Laundering Investigation (DoMLI) to keep CPN-UML vice-chair and former finance minister Bishnu Prasad Paudel in custody for seven days for investigation over allegations of abusing authority to facilitate the undervaluation of high-value shares.

He was detained on Monday.

According to investigators and government attorneys, Paudel is alleged to have played a key role in enabling the sale of shares worth around Rs300 million for Rs37.5 million.

Officials said the investigation focuses on alleged abuse of ministerial authority for financial gain, pressure on regulatory processes to benefit a business group, and possible policy-level corruption linked to businessman Deepak Bhatta, who is already in judicial custody on money laundering charges.

A DoMLI official said Paudel was arrested following statements from businessmen Chunna Prasad Sharma and Kamal Kishor Malpani during the interrogation of Bhatta.

They alleged that a 20 percent stake in Shreeram Tobacco Udyog Pvt Ltd was sold at an artificially low valuation after assurances were given during Paudel’s tenure as finance minister to facilitate government approvals. Sharma had contested the House of Representatives election from Rupandehi-2 on a Nepali Congress ticket against Paudel; both were defeated.

Paudel was arrested on Monday in Surkhet on an emergency warrant and flown to Kathmandu overnight. He was then produced before the Special Court for endorsement of the arrest and remand extension. Government attorneys presented grounds for custodial interrogation, citing risk of evidence tampering.

Government attorneys Bhimsen Kafle and Badri Kumar Karki argued that Paudel allegedly used his position to facilitate the transfer of a 20 percent stake in Shreeram Tobacco to Himalayan Assets Management Pvt Ltd, a company owned by Bhatta, at a significantly undervalued price. According to the Office of the Company Registrar, 375,000 units of shares were transferred for Rs37.5 million in March–April 2024.

The prosecution said further investigation is necessary due to established links between Paudel and Bhatta, including allegations of promised kickbacks in exchange for facilitating the transaction during Paudel’s tenure as finance minister.

Investigators also suspect Paudel of “parking” illicit assets under proxies. Officials said they are examining whether assets linked to him were held under other names and invested in different sectors to conceal ownership.

DoMLI alleges that Paudel helped launder Rs262.5 million through the Shreeram Tobacco share transaction and received financial benefits in return. The claim remains under investigation. Officials also said he is being probed for alleged facilitation in betel nut imports for Shreeram Tobacco and regulatory approvals linked to Himalayan Reinsurance and seven insurance companies.

Paudel’s legal team, including senior advocates Ramesh Badal and Tika Ram Bhattarai, argued that the allegations are based on third-party statements and lack an evidentiary basis. They described the arrest as politically motivated and requested bail, citing low flight risk and his public profile.

Government attorneys opposed bail, arguing that release could lead to evidence destruction and interference in the investigation.

The CPN-UML has condemned the arrest, calling it politically motivated. A statement by party chair KP Sharma Oli alleged that Paudel was illegally arrested while carrying out party duties in Surkhet.

Meanwhile, Paudel’s wife, Domaya Paudel, filed a habeas corpus petition at the Supreme Court on Wednesday, challenging the legality of his detention. The hearing is scheduled for Thursday. The Special Court, the Office of the Prime Minister and Council of Ministers, the Ministry of Home Affairs, DoMLI and the District Police Office, Surkhet, have been named as defendants.

Prior to his arrest, Paudel had reportedly attempted to clarify matters with government officials after learning of the investigation. Sources said Prime Minister Balendra Shah, who was in Chitwan for the Rastriya Swatantra Party general convention, instructed officials to arrest Paudel within two hours of receiving updates on the case. Paudel is currently held at the Police Sector, Pulchowk in Lalitpur.

Paudel is a veteran politician who has served as minister eight times, including five terms as finance minister in 2015, 2020, 2021, 2022 and 2024. He first entered the Cabinet in 1997 as the minister for youth, sports and culture, later serving as the minister for water resources in 2008 and the minister for defence in 2011.

His parliamentary career began with an election win from Palpa, later shifting to Rupandehi, where he has consistently contested and won. He is widely regarded as a key coalition strategist. During the Panchayat era, he was sentenced to three years in prison and fined Rs3,000 over political charges.