Khudgarz is the story of two thick childhood friends Amar Saxena, a young boy from a wealthy family and Bihari Sinha, a boy of the same age from an impoverished background. Amar falls in love with Jaya, a florist and Bihari with Lata, a labourer and they marry the respective women. Amar's father Brij Bhushan Saxena is an industrialist and wants to give a 5-star hotel to his son, as a wedding present. The land for the construction of the hotel incidentally belongs to Bihari. Bihari had previously turned down several offers of selling his land because the house and land were his ancestral property. When Amar requests BIhari, the latter agrees because they go a long way back. However, at the behest of Brij Bhushan, the agreement is drafted in a way that Amar and Brj Bhushan become the sole owners of the land. Bihari, in good faith puts his thumb impression on the agreement and loses his ancestral property. The 5-star hotel gets ready, but on the opening day, a certain section of people condemn Bihari's place, which is on the same premises of the 5-star hotel as a black spot which must be demolished. Amar, who is also convinced with the comments offers Bihari a new house and hotel in return. As Bihari is very sentimental about his hotel and place, he loses his temper and slaps Amar. This sours their relationship. Sudhir, one of the most trusted workers of Brij Bhushan is a corrupt man. He takes the fullest advantage of the misunderstanding between the two friends and takes Brij Bhushan into his confidence, demolishes Bihari's place and hotel by a bulldozer and claims that Amar, in a state of inebriation had order its demolition. Amar believes Sudhir and pleads for forgiveness from Bihari, offering to rebuild the structure for him. However Bihari does not relent and declares that he will himself build a chain of hotels and outshine Amar one day. Bihar is given shelter by his most trusted friend Bhimji Nanji Premji Batiwada, a lawyer by profession. In the meantime, Amar learns that Sudhir is a traitor and throws him out of his house. Sudhir then joins hands with Bihari who he perceives to be on the way up. Bihari is sanctioned a loan from a bank and builds his first hotel. He fixes his sister Lalita's marriage with Sudhir. Amar and his pregnant Jaya are also invited to the wedding and are on their way, but Sudhir manipulates so that Amar and Bihari do not come face to face. In this trap, Jaya is injured, Amar takes her to the hospital where she gives birth to a son and dies. Gradually Bihari becomes more and more successful. His wife birth to a baby girl. Sudhir takes advantage of Bihari's illiteracy and gets blank papers signed by him, thus becoming Biharis equal partner. As luck would have it, the son and daughter of Amar and Bihari respectively fall in love with each other, despite knowing about the enemity of their respective families. Bihari's wife, Lata decides to pay a visit to Amar's house before things get out of hand. She then overhears a conversation and learns that the loans with which Bihari could grow and prosper were backed by Amar. Lalita, Bihari's sister who has been suffering physical abuse at the hands of her husband Sudhir learns that he is making plans to kill her brother. She immediately approaches Amar for the safety of Bihari. Lata informs Bihari about how Amar has been his benefactor. Bihari is crushed on learning about this and goes to Amar and reconciles. The two friends confront Sudhir and thrash him severely but stop short of killing him because he is married to Bihari's sister Lalita.
