Artists coming in to US through one sponsor and performing in other cities (w/o explicit agreement with the sponsors) is actually pretty common, though it is not really allowed. Over the top reaction? A little bit, but they are still in their legal right to do so.
However, there has to be something more to it than Nepathya just going away to SF. Some disagreements, some arguments – perhaps.

From what I can gather, it appears the main cause of the fall-out seem to be the manager and his lack of respect to organizers or viewers. I personally don’t know him so can’t comment on him; as for Nepathya the band itself, it primarily is one man show: Amrit Gurung. Many people have poured their dissatisfaction over him, for not being a great singer like past Nepathya singers, for not be willing to meet with Nepalis, making huge demands etc etc.

Let me play devli’s advocate her for Amrit G and on his defense, he laid out his demands before hand. Is he being primadonna? Hell yes. He is, and wants rockstar treatment. But, possibly, he also wants to make sure his concerts are not like others and wants to offer something special to the audience – like he did in London. If he is making demands at the last minute, then he is being unreasonable – otherwise, he is laying out to you it is upto you to take it or not. As for his talent, I think – and it’s a personal preference- he is one of the best vocal artist in any Nepali band. His range cannot be matched and his vocal caliber is exceptional – miles better than any past Nepathya vocalists. Now, him not willing to meet Nepalis; that’s his prerogative. Many organizers plan a meet-and-greet event for the band members – some chose to do it, some don’t like being exposed like this. Sure, him not wanting to go to an area where there are many Nepalis is a little distasteful (that’s his crowd – his bread and butter), but again, that’s his choice. Finally, about his music choice – I agree, his original compositions suck. The songs he collected from parts of Nepal (Bheda ko Un jasto, Sa Karnali etc) are amazing – but they weren’t his original composition – Nepathya did give the song a very nice treatment though.

My point is, he is a rockstar from Nepal and wants to be treated as one. It is upto the organizers to take him or not. I certainly hope he works on his image though, as it is the fans that made him and they can easily drag him down.

Back to the manager, from what I’ve heard he sounds like the person on the wrong here; but then again we haven’t heard from the other side.