The phd advisor copied my thesis to another's
Your colleague handed her hand-written thesis to her PhD advisor.  She couldn't graduate without bribing him.  He should have had it typed out as-is, but instead he took the liberty to edit it, and added plagiarism from your thesis, then published it.

He is behaving wrongly on many levels:


He should not ask a bribe.
He should not edit her thesis text.
He should not have sent in her edited thesis as her authorship.
He should not plagiarise your thesis.


The people involved:


The advisor is engaging in severe misconduct and should be fired and criminally prosecuted.
Your colleague has been uncareful to not have complete documentation.  She must retract her PhD thesis, because she did not approve the final text and should not bear responsibility for its contents.  She is a victim of the advisor but she is at a large risk of being accused of plagiarism and bribery herself, which makes her situation tricky.
Your PhD thesis still stands.  For you, it should be easy to provide evidence of plagiarism and evidence that you were the original author, for your PhD thesis was already published a year earlier.  The damage to your reputation is much less than to the other people involved, as you are exclusively a victim.


What to do:


Make sure you keep written copies of everything you do.
She has apparently already spoken to the Vice Chancellor, who believes her.  That is good.  Go there together, along with anyone else who has been wrongly treated by the advisor, and ask what formal steps you can take to make him face consequences.
If the vice chancellor is unwilling to proceed, you might threaten with publicity, but I would not do so before.
She needs to retract her PhD thesis because the text is not her responsibility and she did not approve the final version.




P.S. The advice above may be naive.  I am from a society where corruption is not considered normal (when it does happen, it is considered a scandal) and where a situation such as you describe would be unheard of in a university.  I hope the advice is still useful and perhaps the follow-up to these incidents can help improve academic culture overall.

P.P.S. If you know anyone else who hand-writes their thesis, strongly recommend them to contact a computer-literate friend to scan each page soon after it is written and keep this backed up in a safe place.