The 1993 action thriller, produced and directed by Ghai, centered on the escape and attempted capture of a terrorist criminal Ballu (Sanjay Dutt) by inspector Ram (Jackie Shroff) and his girlfriend officer Ganga (Madhuri Dixit).
"We are going to produce three movies next year including, may be a 'Khalnayak Returns'. When Sanjay Dutt comes out of jail after 20 years, what happens to him. It's a sequel, about 'Khalnayak after' 20 years," Ghai told PTI.
"We have found a script, but are in two situations. There is a producer who wants to remake the original 'Khalnayak' and there is a producer who wants to make 'Khalnayak Returns'. So we are considering both the proposals," he said.
The 71-year-old director's previous works like "Karz" and "Hero" were remade for the contemporary audience.
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The remake of "Karz" was directed by Satish Kaushik and featured Himesh Reshammiya in the role, which originally starred Rishi Kapoor. While Nikhil Advani's "Hero" saw two debutants Sooraj Pancholi and Athiya Shetty.
"There are many filmmakers who have approached me to remake 'Khalnayak'. I have to select, who will justify it. Because previously when I gave 'Karz' and 'Hero,' I was not happy with the directors. I became producer and said 'Ok pay money and take it'.
"But this time I am very conscious before I give my subject to somebody, he must justify it. Otherwise what is the difference between both the versions," he said.
The director feels there is nothing wrong in remakes as long as the newer version adds certain freshness to the original and makes it more contemporary.
He was part of a panel discussion at the 47th edition of International Film Festival of India (IFFI).