Having defeated the Bijapuri forces sent against him, Shivaji's army marched towards the Konkan and Kolhapur, seizing Panhala fort, and defeating Bijapuri forces sent against them under Rustam Zaman and Fazl Khan in 1659. In 1660, Adilshah sent his general Siddi Jauhar to attack Shivaji's southern border, in alliance with the Mughals who planned to attack from the north. At that time, Shivaji was encamped at Panhala fort with his forces. Siddi Jauhar's army besieged Panhala in mid-1660, cutting off supply routes to the fort. During the bombardment of Panhala, Siddi Jauhar purchased grenades from the English at Rajapur to increase his efficacy, and also hired some English artillerymen to assist in his bombardment of the fort, conspicuously flying a flag used by the English. This perceived betrayal angered Shivaji, who in December would retaliate by plundering the English factory at Rajapur and capturing four of the factors, imprisoning them until mid-1663.

After months of siege, Shivaji negotiated with Siddi Jauhar and handed over the fort on 22 September 1660, withdrawing to Vishalgad; Shivaji retook Panhala in 1673.

There is some dispute over the circumstances of Shivaji's withdrawal (treaty or escape) and his destination (Ragna or Vishalgad), but the popular story details his night movement to Vishalgad and a sacrificial rear-guard action to allow him to escape. Per these accounts, Shivaji withdrew from Panhala by cover of night, and as he was pursued by the enemy cavalry, his Maratha sardar Baji Prabhu Deshpande of Bandal Deshmukh, along with 300 soldiers, volunteered to fight to the death to hold back the enemy at Ghod Khind ("horse ravine") to give Shivaji and the rest of the army a chance to reach the safety of the Vishalgad fort.

In the ensuing Battle of Pavan Khind, the smaller Maratha force held back the larger enemy to buy time for Shivaji to escape. Baji Prabhu Deshpande was wounded but continued to fight until he heard the sound of cannon fire from Vishalgad,^[7] signalling Shivaji had safely reached the fort, on the evening of 13 July 1660. Ghod Khind (khind meaning "a narrow mountain pass") was later renamed Paavan Khind ("sacred pass") in honour of Bajiprabhu Deshpande, Shibosingh Jadhav, Fuloji, and all other soldiers who fought in there.