Birgunj was founded in 1897 by 11th Rana Prime Minister Bir Shamsher Jang Bahadur Rana; the ancient name was Gahawa. Before the establishment of Birgunj Bazar, the surrounding villages Baghi, Alau, Barewa, Kalaiya, Prasauni, Inaruwa, Chhapkaiya existed. To establish Birgunj Bazar in a forest covered area, Bir Shamsher Jang Bahadur Rana appointed his trusted duo Siddhvir Mathema and Dhadjavir Mathema (two brothers) respectively in Birgunj as the ruler of Mal Ada and Kath Mal Ada. In this connection, Siddhvir Mathema distributed free land and timber and provided cash assistance to the homeowners in Birgunj. The act had subsequently required Siddhvir Mathema to pay the death penalty.