The incident occurred outside Radio City hall in Manhattan on Thursday evening as thousands people, mostly Tibetans and Nepalese-American, were coming out after listening a sold out lecture from the Dalai Lama on the Four Nobel Truths about Buddhism.
Some of those who attended the lecture had paid as much as $1000.
As they came out, they were confronted by the demonstrators. Some among them started shouting at the protesters and waving currency notes to make the point that the demonstrators were paid Chinese agents, a charge which spokespersons of the protesters vehemently denied.
More and more supporters of the Tibetan spiritual leaders joined them and at one stage thousands were participating in a wordly duel.
Police on horseback and ground set up barricades to separate them and physically pushed back some of the supporters of the Dalai Lama as tried to advance towards the demonstrators to prevent a possible clash.
Asked during a question and answer session about the demonstration which had begun much before the Dalai Lama began his address, he described their faith as "just spirit worship."
Conceding that he had followed the practice from 1951 until 1970s, the Dalai Lama said he had given it up after he realised that it was a mistake. By giving it up, he was able to explore other teachings of Buddhism.
"I think 99 per cent of Tibetans follow my practice. Some small portion worship this spirit," he said but asserted it is "perverted or wrong in terms of their function if their spirit is to harm other sentiments beings or the Dharma."
He also asserted that the sect did not allow religious freedom and discouraged any other Buddhist teachings.
Refuting the charge of demonstrators that he was suppressing their sect, the Dalai Lama said on the contrary, he is encouraging religious freedom.
Alleging "hidden and intensive persecution" of thousands of Tibetans who offer prayers to Buddhist Deity Dorje Shugden by the Dalai Lama, the Western Shugden Society (WSS), which spearheaded the protest, demanded that he lift the ban as it causing "spiritual, emotional and physical harm" to them.
The supporters of the WSS, umbrella organisation of Shugden practitioners, have been protesting at every venue where the Dalai Lama speaks for last one week but this was the most visible protest held so far.
It says through his power as head of the Tibet government, the Dalai Lama has "imposed an aggressive, forced" ban on this practice, claiming these prayer "harm his personal health and the cause of Tibet."
Spokesperson of WSS nun Kelsang Pema said since this "enforced ban" by the Dalai Lama is causing so much spiritual, emotional and physical harm to practitioners both in India and the West, they have no choice but to hold demonstrations.
For years, she said, he has refused to engage in dialogue on the issue.
The WSS said some 100 Buddhist Tibetan monks, some from India, had taken part in the demonstration.
Pema described the Dalai as "Hollywood monk," saying he smiles and pretends not to understand English when some serious question is asked.
On its website, WSS lists its aim as to "expose the hypocrisy of the Dalai Lama who presents himself as a champion of human rights and defender of religious freedom while inflicting terrible human rights abuses on his own people and interfering with the religious freedom of thousands and thousands of people around the world."
The Dalai Lama's website says that following long and careful investigations, he "strongly discourages" Tibetan Buddhists from "propitiating the fierce spirit known as Dolgyal (Shugden)."
"Although he once practised Dolgyal propitiation himself, His Holiness renounced the practice in 1975 after discovering the profound historical, social and religious problems associated with it. He did so with the full knowledge and support of his junior tutor, the late Kyabje Trichang Rinpoche through whom His Holiness first became associated with the practice," It adds.
Even within the Geluk and Sakya schools - the Tibetan Buddhist traditions to which majority of Dolgyal practitioners belong - the propitiation of this spirit has been controversial throughout its history, it says.
Historical investigation reveals that Dolgyal practice, which has strong sectarian overtones, has a history of contributing to a climate of sectarian disharmony in various parts of Tibet, and between various Tibetan communities.