The Gurdwara marks the site, where Lakhi Shah Banjara and his son Bhai Naghaiya burnt their own house to cremate the headless body of the Sikh Guru Guru Tegh Bahadur sahib who, on 11 November 1675, was martyred by beheading at Chandni Chowk on the orders of the Mughal emperor Aurangzeb for refusing to convert to Islam and buried the ashes in the house itself.

Another dispute arose when during 1914 a portion of boundary wall was demolished by British Goveronment to straighten a passage to viceregal building.

On a protest and agitation raised by Sikhs Goveronment yielded as soon as World War I came to end in 1918, and boundary wall was rebuilt at public expense.

At a meeting of the Panth where several prominent Sikhs had gathered to plan the construction, a businessman from Delhi, stood up and with great humility, holding up his shirt as a begging bowl, beseeched the panth to grant him the entire Seva of building the Gurdwara at the holy site near the Parliament House in New Delhi.

The panth agreed to grant him the seva and S. Harnam Singh Suri worked tirelessly, to build it to perfection, until it was completed in and around 1969.