At Bengaluru’s Commercial Street police station, next to .303 rifles, piles of documents lie in a corner. There are more than 10 bundles, each about four feet tall. These are the 30,000 odd complaints registered against I Monitory Advisory (IMA) and its chairman Mohammad Mansoor Khan, responsible for an alleged Rs 2,000 crore scam in Bengaluru.
Even though the police are receiving fresh complaints every day, and one of the cheated investors died of a heart attack, Khan’s whereabouts remain a mystery.
The police, who have received fresh evidence – an immigration document and Khan’s cars parked at the airport – suspect he might have fled to Dubai.
But the most wanted suspect in Bengaluru was flagged as a potential fraud by the Reserve Bank of India (RBI) as early as 2015, and again in 2018. Also, according to reports, as recent as 8 June, just two days before he allegedly left the city, on the instruction of Karnataka DG & IGP, the Central Crime Branch had called him for questioning.
Khan’s escape despite being under scanner has now raised several questions.
The First RBI Alert
In 2015, the Market Intelligence Unit of the RBI had sent an alert to the Karnataka government, pointing out irregularities in the functioning of IMA Jewels.
According to a source privy to the details, the 2015 alert informed the government that the IMA business model of collecting deposits was illegal – and that it was a Ponzi scheme.
However, the government took no action against IMA. Their argument was that IMA was not taking deposits and was instead a Limited Liability Partnership Company. This meant that, instead of the taking deposits, IMA was giving partnership to investors.
“The loophole was the religious angle to the Ponzi scheme,” the source told The Quint. “Claiming it was a halal investment under Islamic law, Khan did not take deposits or paid interest. Instead, he made every investor a partner and promised a portion of the profit,” he added.
How the Loophole Helped Khan?
In response to the 2015 RBI letter, the Karnataka government said that Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004 (KPIDFEA), which is the law used to punish such Ponzi schemes, did not apply to Mansoor Khan and IMA.
Section 2, subsection 3 of KPIDFEA, which defines a deposit, had excluded “amounts contributed as capital by partners of a firm”. The Karnataka government said the investments taken by IMA came under this loophole, hence it can’t be prosecuted.
Even though there was a police investigation ordered into the matter, the police, too, wrote to the RBI and, citing the same loophole, said no police action was possible against IMA.
Second RBI Alert in 2018
The RBI once again sent an alert to the Karnataka government about IMA in 2018. This time it was also pointed apart from taking illegal deposits, despite being Limited Liability Partnership Company, IMA had failed to pay dividends to the investors.
Unlike 2015, this time the government appointed an assistant commissioner rank officer of the revenue department to probe into the RBI alert. On 16 November 2018, the revenue department issued a public notice against IMA.
“Since it has come to the notice of the government that M/s I Monetary Advisory Private Limited and its associates have committed an offence by illegally collecting money from the public and diverting the said funds to its director’s self-interest thereby committed default in payment of depositor’s money,” read the notice.
The notice in its attempt to tell public about the fraud, listed Khan’s name and names of the associate entities of IMA. The notice claimed the investments were being diverted for the owner’s self-interest.
According to the source, the police needed a complaint to register a case against IMA. Although over 7,000 complaints against another Ponzi scheme, Ambidant Marketing, and over 2,000 complaints against one more, Hindustan Infra Pvt Ltd, no complaints were lodged against IMA. Since there was no case, even this alert was forgotten.
The case subsequently went to the Economic Offences Wing of the Criminal Investigation Department as well, but even they didn’t find grounds to lodge a complaint.
Minister Endorses Rs 600 Crore Bailout
Virtually affirming the allegations made by the revenue department in the public notice the investor funds diverted, Khan applied for Rs 600 crore loan to a bank to bailout his company. According to a report in The Times of India, as the company was under RBI scanner, the bank asked for a no-objection certificate (NOC) from the government.
But, instead of taking cognisance of application as an evidence to probe the revenue department’s allegation, according to the report, a senior minister in the state government lobbied for the NOC. However, it was turned down.
The Crime Branch Investigation
Days after Khan fled the city, the senior Bengaluru police officer had admitted to the media that police had Khan for interrogation. On 6 June, on the instructions of the Karnataka DG & IGP Neelamani Raju, the chief of the Central Crime Branch (CCB) Alok Kumar had summoned Khan for questioning.
He was questioned for over an hour and was asked to produce documents about the company. It was while this investigation was underway, on 8 June, Khan fled the city. The police said that they had no inkling that he would leave the city.
While the investigations were on, IMA issued several statements to investors claiming their money will deposited, and they were delayed because of the increased security during election.
One statement even asked investors to file complaint with cyber cell against those spreading the news about the company going under.
Investors Allege Cover Up; BJP Demands CBI Probe
Despite these investigations as early as 2015, Khan allegedly fleeing to Dubai has raised several question. Many investors present at the Commercial Street police station claimed that a man under multiple investigations, especially who had been under the RBI scanner since 2015, fleeing the city indicates a potential cover up by the government.
Many, on the condition of anonymity, claimed money laundering and financing for politicians results in the recent fallout. These claims, however could not be corroborated.
The BJP has already demanded a CBI probe stating their lack of confidence in the investigation. In the meantime, the SIT formed to probe the case is yet to share any details about the investigation so far.
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