The dispute within the UML had been gradually escalating after the Mahakali Treaty between Nepal and India was ratified by a two-thirds majority in parliament on the night of October 4, 2053 BS. The public statements made by leaders including UML General Secretary Madhav Kumar Nepal, who was in favor of the Mahakali Treaty, and former Deputy General Secretary Bamdev Gautam, who was opposed to the treaty, had widened the gap of distrust between the parties rather than resolving the differences within the party.

General Secretary Nepal had termed Gautam's stance on the Mahakali Treaty as 'Mandala nationalism'. Gautam, on the other hand, had been strongly criticizing the General Secretary's side for signing the treasonous Mahakali Treaty. At a formal event organized in Kathmandu on 12 Poush, 2001, the accusations and counter-accusations between Gautam and Nepal were not only interesting and shocking, but also sent a message about the extent to which communist party leaders will resort to abusive language among themselves as soon as they disagree on an agenda.

The slogan most often used by Nepal's communist parties is 'Indian expansionism and American imperialism'. General Secretary Nepal had even revealed that Gautam had reached the Indian embassy and agreed to support the Mahakali Treaty. The UML General Secretary himself had given the message to his party leader Gautam that he was colluding with Indian leaders internally, citing the incident of entering the embassy.

During his speech at the event, General Secretary Nepal had said, 'Comrade Bamdev himself reached the Indian embassy and agreed with the ambassador.' Nepal had given this response after Gautam accused the Mahakali Treaty of treason. They made each other's secret incidents public and linked their closeness to Indian leaders and the embassy.

Gautam, who is also a former Home Minister, was questioned by General Secretary Nepal about why the Mahakali Treaty documents were exchanged when Indian Prime Minister Indra Kumar Gujral visited Nepal. Gautam, in turn, accused Nepal of showing an artificial majority by showing a letter brought from the Indian embassy at the time of the Mahakali Treaty's passage.

General Secretary Nepal questioned Gautam because the treaty would come into effect only after the then Prime Minister Lokendra Bahadur Chand and Home Minister Bamdev Gautam handed over the treaty documents to the Indian Prime Minister. At the national cadre meeting of the party's sister organization, the Democratic National Youth Association of Nepal, both leaders concluded their speeches by accusing each other of wrongdoing. During the speech, General Secretary Nepal had severely criticized Gautam.

Responding to Nepal's allegations, Gautam had said that the treaty was treasonous because India was reluctant to make the resolution passed by the parliament a part of the treaty. He had questioned why the party had to ratify the treaty in a hurry, citing India as the reason for the DPR of the treaty not being ready.

Nepal had retorted by asking Gautam, 'Why didn't you have the courage to say that despite being present at the treaty exchange ceremony, letters could not be exchanged as per the resolution? Why didn't you have the courage to leave the government? If such a nationalist had to wage war with India, why didn't you declare it?' Nepal had called Gautam's nationalism fake, telling him not to talk nonsense for two days.

Gautam had said that Nepal disagreed with the Secretary General's provocative speech and that he was not in favor of a war with India. He had said that he had advised the then Prime Minister Chand and Home Minister Gautam not to give the treaty documents to India if Nepal did not accept the resolution passed by the parliament, but they refused. Gautam, however, claimed that no one had given him such advice.

Nepal had sharply criticized Gautam, citing the incident of Gautam not obeying the party whip during the Mahakali Treaty. In response, Gautam had said that during the ratification of the Mahakali Treaty, ‘discipline was violated due to patriotic sentiments.’ Nepal, however, had warned Gautam not to break the voice of the people and the party’s decision, saying that if the UML did not consider it a nationalist and revolutionary party, he could leave. He had publicly warned Gautam, saying, ‘If the UML does not consider it a revolutionary party, it will join another revolutionary party. But as long as it remains in the party, its role cannot be underestimated.’ Nepal had claimed that the Mahakali Treaty itself was not flawed.

Nepal had criticized Gautam for trying to pass the electricity trade agreement with India by a simple majority instead of a two-thirds majority. He had said, ‘The UML-led government tried to pass it by a landslide, is that nationalism?’ Gautam, however, had clarified that he did not know that it should be passed by a two-thirds majority. Gautam had said that he left early on the day the proposal was submitted, and that he was ready to self-criticize because he did not know. Nepal had expressed dissatisfaction with Gautam’s writing in his document that the Chand-led government was nationalist. His argument was, ‘Will the government become nationalist once Chand joins?’

Nepal had suggested that Gautam should understand the tactics of the reactionaries, saying that the UML should not be trapped by the whims of nationalism. Gautam, in his political report submitted to the party, accused General Secretary Nepal of not opposing 'American imperialism and Indian 'regional hegemony'. He reminded that there was an agreement in the party to criticize based on merit and demerit rather than calling someone an imperialist and expansionist.

Nepal had accused him of bringing a different document through political dishonesty to show himself as a staunch anti-imperialist and others as pro-imperialist. The two leaders had made the document submitted to the Central Committee the subject of a speech at a formal program some time ago. Kantipur Daily published a news report prepared by journalist Gunaraj Luintel on the speeches made by Nepal and Gautam that day under the title 'Bamdev's fake nationalism in the Mahakali Treaty: Nepal, there was no justification for passing the treaty in a hurry: Bamdev' on 13 Poush 2054.

In particular, the UML was divided into two parts over the issue of getting the Mahakali Treaty ratified by the parliament. Since then, the differences in the party had deepened. The division between the supporters of Madan Bhandari's People's Multi-Party Democracy and CP Mainali's New Democracy presented at the fifth general convention of the UML had deepened until the Mahakali Treaty.

The General Secretary Nepal faction was also dissatisfied with the role played by Gautam in making RPP leader Chand the Prime Minister. That is why the core leadership of the UML was not happy with the government of Chand who became Prime Minister in 2006 Falgun and Gautam who became Home Minister. The Chand-led government was toppled in 7 months with the support of the Congress. Chand's replacement, RPP Chairman Surya Bahadur Thapa, was appointed Prime Minister on 20 Asoj 2006.

The Mahakali Treaty was approved by Parliament in 2006 Asoj when Sher Bahadur Deuba was the Prime Minister. The treaty documents were handed over to the Indian Prime Minister in 2007 when Chand was the Prime Minister and Gautam was the Home Minister. At that time, Indian Prime Minister Gujral had visited Nepal. There have been accusations of 'nationalism and nationalism' between Gautam and Nepal over the same context.