Hindu Monarchy with Hinduism as State religion ruled Nepal for centuries. The system of governance was also based on Hindu scriptures. As Buddhism was accepted as a part of Hindu society, the followers of this religion had no problem in the kingdom. But Muslims, the third religious group in the kingdom was allowed to practice their faith under certain restrictions. They were debarred from propagation of Islam or to follow the Islamic code Shariat in respect of dissolution of marriage by oral pronouncement of the word ‘Talaq’ thrice. In case of inheritance also they were to follow the Hindu-scriptures based code of Nepal. Any violation of Hindu scriptures based Nepal Code was a punishable offence. The situation therefore, was not congenial for the Islamic community to settle there. Even during Muslim rule in India Muslim migration to this country was insignificant. Perhaps strict implementation of Hindu scriptures based code was the main reason behind the indifference of the community towards settling in Nepal. In spite of such restrictions, it is unusual for the Muslims to become a significant third religious group in this Hindu kingdom.