The apex court ruling in New Delhi was received with joy by his family and supporters who burst firecrackers, distributed sweets and smeared colour on each other in Patna and across Bihar. (Agencies)
The Congress and the Lok Janshakti Party (LJP), Lalu Prasad's old allies, and even the BJP welcomed the development. Chief Minister Nitish Kumar declined to comment although his Janata Dal-United (JD-U) called it a routine judicial process.
"I am happy. I was waiting for this day for over two months. We will be happy to welcome him home on Saturday," said his beaming wife and former Bihar chief minister Rabri Devi.
"I was feeling lonely without Laluji. Now this phase will be over. Laluji will come out of jail, and start a normal life. Laluji is always in my heart. No one can take him away," she added.
In due course, Lalu Prasad would also be acquitted of the charges of involvement in the fodder scandal, she said.
Convicted in September by a special CBI court in Ranchi, in one of the fodder scams, Lalu Prasad was sentenced to five years in jail.
The Supreme Court barred him from contesting elections for six years after his release. Rabri Devi, however, declared that he will campaign for the 2014 Lok Sabha battle.
Two of her sons will visit Ranchi to accompany him back to Patna.
Lalu Prasad, former Bihar chief minister Jagannath Mishra and 43 others were accused of fraudulently withdrawing Rs 37.70 crore from the treasury of Chaibasa district in the present day Jharkhand.
Reports reaching Patna spoke of celebrations in Gaya, Muzaffarpur, Samastipur, Vaishali, Bhagalpur and Jehanabad.
Bihar Congress president Ashok Choudhary said Lalu Prasad would strengthen secular forces in the state, at a time when the JD-U and BJP, allies for 17 long years, are at war.
LJP chief Ram Vilas Paswan said the bail had come at the right time.
"Laluji's presence will further strengthen our alliance," he said, adding that the Congress should join hands with the LJP and RJD.
BJP leader Giriraj Singh said his party was "not afraid of Lalu. It is the JD-U which fears Lalu."
A bench of Chief Justice P Sathasivam and Justice Ranjan Gogoi, while granting bail to Lalu Prasad, noted that other accused have been granted bail.
Of the 44 accused, 37 have got bail while the bail pleas of six others are being considered by the trial court. Lalu Prasad is the only one whose bail plea was rejected by the lower courts.
The apex court also noted that of the five years' jail awarded to Lalu Prasad, he had already undergone one year in two phases.
It has left it to the Ranchi trial court to decide on the conditions to be imposed on the former Bihar chief minister before he was freed on bail.
Lalu Prasad's case in the Supreme Court was argued by senior counsel Ram Jethmalani, a former BJP MP.
Lalu Prasad moved the apex court, challenging the Jharkhand High Court's October 31 interim order dismissing his bail plea.
The apex court ruling in New Delhi was received with joy by his family and supporters who burst firecrackers, distributed sweets and smeared colour on each other in Patna and across Bihar.