The Nepalese claim that the southern side of the pass, called Kalapani Territory, is based on the Sagauli contract of 1816 between the British East India Company and Nepal. The contract limits the border along the Kali River (also known as the Sharda river and Mahakali). India claims that the river begins in the village of Kalapani, because it is where all its tributaries melt. But Nepal says it comes from the Lipulekh Pass.  History shows that, around 1865, the British moved the border near Kalapani into the Kalapani River basin instead of the river itself, claiming the territory now known as Kalapani Territory.  This is consistent with the British position that the Kali River only begins from Kalapani`s springs, which meant that the Sugauli Agreement did not apply to the area above the springs.  In the 1700s, Nepal had an ambitious king named Prithvi Narayan Shah, known for the solidification and unification of Nepal. In Uttarakhand, it has extended its territories to the west. On the Indian side, Britain was the master. The two armies faced a war that ended in 1816 with the Treaty of Sugauli.
It demarcates, among other things, Kumaon to uttarkhand of Nepal, the Kali River serving as the border between India and Nepal. Like many rivers of Himalayan origin, the Kali River has moved its route, not as important as the Koshi River, but still significant. Second, to delineate the Kali River as a border, there should be agreement on the origin of the river. India and formerly Britain look at its origin in the source of northeastern streams — Kalapani Creeks, while Nepal says the river forms southwest — Kuthi Yankti — Creeks. China views the region as a border point between Nepal, India and China, and a Nepalese-Chinese border agreement signed three and a half decades ago recognized kalapani, an area beyond the origin of the Mahakali River, within Nepalese territory. Prime Minister Oli said that China had replied that the agreement was linked only to traditional pilgrimage and trade routes and that it did not mean that international borders should be defined by the agreement. Mr. Gyawali stated that there was no agreement other than the 1816 Sugauli Treaty, which defined Nepal`s western border with India, and that treaty clearly states that the three territories belong to Nepal.
A meeting of the Committee on International Relations and the Work of the Nepalese Parliament on Tuesday concluded that the agreement violated international principles and values at a time when Nepal and India were working to resolve border problems. For Nepal, China`s trade agreement with India and the use of the Lipulekh passport act as an informal statement that the passport is the origin of the Mahakali River. That is why what was a historic bilateral issue between Nepal and India about the Kalapani region has turned into a trilateral affair. Since the early 1950s, India and China have concluded a series of agreements that mention the lipulukh passport as a potential trade route between the two countries. In 2015, in a Sino-Indian trade pact, the Lipulekh Pass was described as a trijunction between Nepal, India and China, without consulting Nepal. Nepal claims that the Limpiyadhura region is the Trijunction, and therefore the Lipulekh Pass is part of Nepal.