Following an inquiry, the Congress party on Tuesday suspended MLA R Roshan Baig from the party with immediate effect for indulging in "anti-party activities."
The decision came after the party office bearers wrote to the chief of Karnataka Congress unit Dinesh Gundu Rao demanding the dismissal of Baig from primary membership over his alleged connection with IMA Ponzi scam's main accused Mohammed Mansoor Khan.
"All India Congress Committee has approved the proposal sent by KPCC to take action against R Roshan Baig, MLA, on account of his anti-party activities. He has been suspended from the party with immediate effect, on the basis of an inquiry conducted into the matter," Karnataka Pradesh Congress Committee (KPCC) said in a press note.
The office bearers have also urged Rao to take stringent action against those people who have helped Mansoor Khan in the financial fraud case.
The development comes days after Khan, who is the founder of the IMA Jewels, accused Baig of taking Rs 400 crore from him and not returning the money.
Karnataka legislator Baig, however, has refuted the allegation and termed it as a "total conspiracy."
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"This is a total conspiracy against me. My heart is clean," he had said.
Baig also urged Karnataka Chief Minister HD Kumaraswamy to refer the investigation to the Central Bureau of Investigation (CBI) for a speedy probe.
Karnataka government had constituted an 11-member Special Investigation Team (SIT) to probe the alleged fraud by the IMA Jewels, which has an estimated Rs 200 crore investment of Muslim women alone. Over 38,000 complaints have been filed by the people who have invested in the firm.
Eighteen complaints were filed in the High Court, seeking direction to the state government to handover the IMA case to the CBI. Several investors also hail from Andhra Pradesh, Telangana, and Tamil Nadu.
Police have also registered a case against IMA Jewels and Khan and teams have been formed to nab him. Earlier, seven directors of different entities linked to Khan had been arrested.
It is alleged that IMA Jewels, with Muslims as its prime investors, has not paid interests on investments for the last three months.
Earlier, scores of investors staged protests outside the office of IMA Jewels at Sivaji Nagar, asking the firm to return their money.