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The history of town is nothing less than a tale. When the 8th Sikh Guru, Guru Harkrishan was on his death bed, he was asked to name his successor, he just uttered the name of the place "Baba Bakala". This created apprehension in Sikh Community. Many people in Baba Bakala started imposing themselves as the Sikh Guru. Meanwhile, Baba Makhan Shah Labana a rich maritime trader from Tanda (now in Pakistan) got struck in a sea storm, and prayed to Guru Nanak Ji for help. In his plea he would donate 500 Dinars to the Guru for his protection.
By God's blessing he reached safely to the port unharmed. On reaching Bakala, he was flabbergasted on seeing the number of people imposing themselves as the 9th Sikh Guru. He thought of a plan, he said he would give 2 Dinar to everyone who claimed to be the true successor of the Guru Harkrishan. He knew only the true Guru would know that he had vouched for 500 Dinar and the one who were satisfied by just 2 Dinar, they were not the true Guru.
No one seemed to be the true successor, as they all lacked spiritual impending and moral character that of a righteous Guru. He heard of a hermit named Tegh Bahadur the son of Guru Hargobind. He offered him 2 Dinar, and since he was the true Guru. He reminded him of his pledge of donating 500. Baba Makhan Shah was flabbergasted as he was the one who found out the true 9th Guru.