VS Rajender Babu, director of Aag Ka Dariya (River of Fire), said, the film did not get released initially because of a financial dispute.
In the intervening years, the original print of the film was badly damaged.
But Mr Rajendra Babu said he recently found a “perfect print” of the film with a distributor in Singapore.
“I was surprised when I saw the negative of the print, it was kept so carefully. The print has been sent to the lab for colour correction and post-production work,” he said.
“I believe this will be his (Dilip Kumar’s) last film and he will be happy to see it,” he added.
The veteran actor is 90 and has been in poor health for some time now.
Dubbed “The Tragedy King” for his roles in many Bollywood classics in the 1950s and 60s, he is one of India’s best-loved actors.
Described by critics as the ultimate method actor in India, he has won more awards than any other Bollywood star. Over his long career, he has won eight Filmfare awards, India’s version of the Oscars.
In Aag Ka Dariya, Kumar plays an Indian air force officer and the story revolves around corruption in the defence forces. Well-known actress Rekha plays the leading lady in the film.
Mr Rajendra Babu, who has directed several award-winning Kannada and Hindi films, said the film had been cleared by the Censor Board and would be released some time in the new year.