Lakhpat Rai was a Diwan(Revenue minister), at Lahore under two successive Mughal viceroys, Zakriya Khan (1726 - 45) and Yahya Khan (1745-47). He came of a Hindu Khatri family of Kalanaur, in Gurdaspur district of the Punjab. In 1736 when Zakariya Khan organized a mobile column of 10,000 to scour the country in search of Sikhs then condemned to indiscriminate murder and slaughter Lakhpat Rai and Mukhlis Khan, the governor's own nephew, were put in command of this force. The Sikhs with their fighting force, the Buddha Dal, were driven to take refuge in the jungles south of Sutlej. They however, soon struck back and Buddha Dal and Taruna Dal jointly fell upon Lakhpat Rai, defeating his mughal column at Hujra Shah Maqim, near Lahore. Among the Mughal officials killed was Lakhpat Rai's nephew Duni Chand. In 1736, Lakhpat Rai was deputed to proceed to Amritsar to molest the Sikhs gathering for the Diwali festival permission for which holding which had been secured from the governor himself. This caused confusion and failure of the revered Bhai Mani Singh to pay the stipulated amount to the Mughal satrap owing to attenuated attendance was made an excuse for his capture and execution (AD 1737). In the eyes of the Sikhs, Lakhpat Rai was principally responsible for the Bhai Mani Singh's martyrdom.
Nadir Shah's invasion of 1739 dealt a severe blow to the Mughal government. Light cavalry bands organized by Zakariya khan to suppress the Sikhs impoverished the peasentry by their extortion as a result of which revenues dwindled and the treasury became empty. Zakariya Khan, holding Diwan Lakhpat Rai responsible for the financial breakdown, imprisoned him for his failure to discharge the dues of the army. But Lakhpat Rai's brother Jaspat, himself an influential courtier paid a large sum from his personal treasure and secured Lakhpat Rai's release and reinstatement. Lakhpat Rai continued as Diwan under Yahiya Khan, when he succeeded Zakariya Khan in 1745. The death of his brother, Jaspat Rai, at the hands of the Sikhs (Nibhau Singh climbed up to his elephant and beheaded him in a skirmish) in 1746 greatly enraged him and he vowed revenge, declaring that he would not put on his headdress, nor claim himself to be a Khatri until he had Scourged the entire Sikh Panth. As a first step, he had the Sikh inhabitants of Lahore rounded up and ordered their execution. Intercession b a group of prominent Hindu nobles led by Diwan Kaura Mall was of no avail. Lakhpat Rai ignored the request even of his Guru, Sant Jagat Bhagat Gosain, that the killing should not be carried out at least on the Amavas, the last day of the dark half of the month which, falling on a Monday, is especially sacred to the Hindus. Executions took place as ordered on that very day, 13 Chet 1802, 10th March 1746. The angry diwan then set out at the head of a large force, mostly cavalry supported by canon, in search of Sikhs who were reported to have taken shelter in the swampy forest of Kahnuvan, on the right bank of River Beas, 15 km south of Gurdaspur. He also mobilized the local populace in these operations. The besieged Sikhs put up a determined fight but were severely outnumbered and scattered with heavy losses. They were chased into the hills and, to complete the revenge says Syed Mohammad Latif, the Muslim Historian of the Punjab, Lakhpat Rai brought with him 1,000 Sikhs in irons to Lahore, and having compelled them to ride on donkeys, bare backed, paraded them in the bazars. They were, then taken to the horse-market, outside Delhi Gate, and there beheaded one after another without mercy. On this site was later raised a memorial shrine known as Shahid Ganj.
More then Seven thousand Sikhs lost their lives at Kahnuvan (1 May 1746). In Sikh history this devastation is referred to as Chhota Ghalughara or Minor Massacre as distincguished from Vadda Ghalughara or the Great Massacre that took place on 5 February 1762. Lakhpat Rai in order to ensure the total extinction of Sikhs, order their places of worship to be destroyed and their holy books burnt. He decreed that anyone uttering the word guru should have his belly ripped. Considering that the word gur meaning jaggery, sounded like Guru, he prohibited its use.
When in March 1747, Shah Nawaz Khan, brother of Yahya khan and governor of Multan, occupied Lahore, he imprisoned Yahiya Khan and Lakhpat Rai, but Ahmad Shah Durrani who seized Lahore in January 1748 set up a local government in the Punjab, with Jalhe Khan as governor and Lakhpat Rai as his Diwan. The Durrani, defeated Mughals in the battle of Manupuar on 11 March 1748, beat a hasty retreat to his own country, and Muin ul Mulk commonly known as Mir Mannu, became the governor of Lahore. Mir Mannu, imprisoned Jalhe Khan and Lakhpat Rai and appointed Kaural Mall his Deputy and as his Diwan. He demanded from Lakhpat Rai and indemnity of Three Lakh rupees which he was not able to pay. Diwan Kaura Mall who had opposed Lakhpat Rai's repressive policy towards the Sikhs in 1746, now offered to make up the balance provided the prisoner was handed over to him. Mir Mannu agreed and transferred the charge of Lakhpat Rai to Kaura Mall, who gave him into the custody of Dal Khalsa. He was thrown into a dungeon which Sikh army used as a lavatory, there he died a miserable death after Six months of indignity and torture (1748).
:Encyclopaedia of Sikhism - Harbans Singh