The film opens with shots of brooms and dustpans cleaning dried blood, and cartridge casings in and around the Swati building at the Lokhandwala Complex.[2] TVN reporter Meeta Matu (Dia Mirza) reports that some 3000 rounds of ammunition were discharged by a large police squad at a previously peaceful residential area.
The film moves to the office of former chief justice turned private prosecutor Dhingra (Amitabh Bachchan), who interviews the three leading members of the Bombay Encounter Squad: Additional Commissioner of Police Shamsher S. Khan (referring to A. A. Khan, played by Sanjay Dutt), Inspector Kaviraj Patil (Sunil Shetty) and Constable Javed Sheikh (Arbaaz Khan). The main film timeline is the extended interview of the three officers by Dhingra; as the officers answer Dhingra’s questions, the film flashes back to show the incidents.
Dhingra asks about the Encounter Squad. Khan explains that he hand-picked 27 of Bombay police’s best-enlisted men and officers. He borrowed the concept from the LAPD SWAT team to help combat crime. The film flashes back to show Khan selecting his men and putting them through intensive physical and mental training to be “fast, efficient and deadly.” Dhingra is hardly impressed: he points out that if Khan “shoots to kill,” he is no different from the gangsters he seeks to destroy.
Dhingra asks why Khan felt he had to do this. Khan explains that following Operation Blue Star in 1984, several Sikh terrorists fled to Bombay and began establishing a base in the city. They engaged in violence, extortion, and other subversive tactics to grow their operations. The film flashes back to show Sub-Inspector Mhatre (Abhishek Bachchan), a very brave officer and disciple of Khan, pursuing and subsequently getting shot down by a group of Sikh terrorists. Khan is deeply frustrated when the Bombay police, mired in internal bureaucracy and corruption, fail to act. He obtains clearance from police commissioner Krishnamurthy (played by the real A. A. Khan) and sets out after the militants. Khan asks Meeta (Diya Mirza) to cover the incident so as to deter future terrorists. True to Khan’s words, he successfully “encounters” (it indicates summarily gunning down criminals; extrajudicial killings is the term accepted internationally) the terrorists who shot PSI Mhatre. (As per A. A. Khan, the encounter with Khalistani extremists was more dangerous and tough than the Lokhandwala Complex shootout.)