Starting as an ordinary worker in the Mumbai docks, he later joined a gang of ethnic Pashtuns (called Pathans in India) who worked as illegal recovery agents for Marwari and Gujarati money lenders, landlords, and businessmen.

For over two decades, he was the leader of the dreaded "Pathan Gang" that operated in impoverished and crime-infested Muslim ghettos of South Mumbai like Dongri, Nagpada, Bhendi Bazaar, and Mohammad Ali Road.

Due to failing health during the late seventies, Lala gradually transferred the leadership of the Pathan gang to his nephew, Samad Khan and then managed his hotel and transport business.

The 1973 movie, Zanjeer, the writer duo, Salim–Javed created a Pathan character called "Sher Khan" (played by actor Pran) whose mannerisms resembled Karim Lala.

Widely considered to be the inspiration for the magnanimous crime lord Abdel Khader Khan in the 2003 bestselling novel Shantaram, Karim shares personal and behavioral similarities with the fictional mafia don.