Ranbir Kapoor is slated to play Dutt in the movie, which the director is writing with Abhijat Joshi.
Dutt, 55, is currently serving a jail term for illegal possession of weapons before the 1993 Mumbai blasts.
The director said the suggestion to make a film on Dutt, who is the son of late Bollywood stars Nargis and Sunil Dutt, came from the actor's wife Manyata.
"His wife once told me 'why don't you make a film on him' but I did not think there was a story till one day Sanju started telling me about himself. I was like 'My God! what a life'. Everytime we would step out of his house after hearing his stories, I would tell Abhijat: 'We are primary school kids who have not lived at all'," Hirani told PTI.
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Dutt will be seen doing a special role in Hirani's upcoming Aamir Khan-Anushka Sharma starrer 'PK', releasing this Friday.
The director also promised 'Munnabhai' fans that he will come up with the third instalment in the series though he shelved 'Munnabhai Chale Amerika'.
"We are writing the next 'Munnabhai' and it should be ready by the time Sanju completes his sentence. We shelved the earlier movie as we could not crack the second half. The series has set a standard and I did not want to make a mediocre film for the sake of it," Hirani said.
"During my college days most of my friends were in medical colleges. I was a commerce student so I had all the time in the world and would just hang out with them. I found their world very fascinating.
"I would write down things that I found interesting. When I went to film institute, I planned to do a film on how medical students function but it was very anecdotal in nature and I left it," Hirani said.
The director moved on to writing other scripts but somehow he would keep getting drawn to the story.