To be rigorous in accuracy, the place called Shop I was a deal with a guy down on the Terai to make HI products part-time. When the shop owner wasn't around, they still turned out khuks for, among others, Khukuri House, which was the supplier to the now defunct Gurkha House.
The shop owner had back problems requiring surgery in India. While he was off ( several months ) no khuks were available to HI. No khuks, so sales, no income. Pala resolved this by starting Shop 2, under his own immediate supervision.
The Shop 1 owner, once back at work, howled that Pala had left him high and dry on the deal, etc. Then the guy running Gurkha House got to his Khukuri House supplier, and tried to get KH to ship him stuff from the shop on the Terai. He even got some HI rejects left over that hadn't met Pala's QC.
In the meantime, Shop 2, then later Birgorkha, had growing pains, but ( in my own sole opinion ), started returning to it's roots, that of making khuks that were functional. They accomplished this by turning out khuks with the proper "pine" ( nepali for temper/hardness ) which the Shop 1 had let drop down into the Rockwell C scale around the mid 50's, IIRC.
Initially, Shop 1 had kept up the cosmetics, where Shop 2 started up with so-so outward appearances, but improved and kept improving. About this time Bura showed up.
When Shop 2 started making the kami's put their mark on their work, and the kamis found out the buyers watched their work like hawks, the kamis essentially found out they were right back to keeping up their work so the town folks didn't bring back failures. Plug Ugly khuks didn't get paid as highly for. Pala paid high if the workmanship was worth it.
Leastways, it went more or less something like that.