The teacher, who married a Nepali man in the early 1990s, later adopted the girl but during the adoption process a female "house mother" told her the girl had been bleeding heavily from her genitals.
The girl initially said she had fallen but later told her that she and Shrestha were lovers who fed each other plums. “’I know Rabin uncle and he is my lover, he feeds me plums and I feed him plums and he touches me and I touch him’, she told me”, the teacher told campaigners.
When her daughter was alone with him, he threw "birthday tea" parties at which he sexually abused and raped her, and when she was with the older girls he would stage "wedding ceremonies" in which they would be raped and forced to abuse two young boys.
The experience had left her daughter psychologically damaged. “She now thinks that every Saturday is her birthday”, she said, and is terrified by the sound of Nepali wedding bands. “If she hears the band in the street she covers her ears and crouches down on the ground and screams”, she told children’s rights activists.
The girls were regularly taken to "dance bars" in Kathmandu’s seedy Thamel red light district where they were given alcoholic drinks and groomed as prostitutes.
Mr Shrestha and another orphanage official were arrested and taken into custody last week after the campaign group Action for Child Rights International (ACR-Int) handed over a dossier of evidence to the police.
Superintendent Pitamber Adhikari of Nepal’s Central Investigation Bureau confirmed the arrests and said the two men are under investigation. They have denied the allegations against them while the Bal Mandir home rejected any connection with them. The suspects are expected to appear in court next week.
The British teacher said she could not comment on the case until after next week’s hearing.
Lieutenant-Colonel (Rtd) Philip Holmes, a leading anti-child abuse trafficking campaigner said the sexual abuse alleged at Bal Mandir was widespread in Nepal.
“This case is by no means unique and we will continue to support ACR-Int as it rescues children and brings paedophiles to justice”, he said.