Mr Dutt was riding a wave of success, with megahits like Khalnayak and Saajan, when arrested in 1994 from the Mumbai airport.
In his confession that he later retracted, the actor said mafia don Abu Salem visited his home in January 1993 with Samir Hingora and Hanif Kadawala, proprietors of Magnum Video and alleged close associates of underworld don Dawood Ibrahim.
Mr Dutt said they had brought three AK-56 rifles with ammunition, and he kept one. The gun, he claimed, was to protect his family as they had received threats during the Mumbai riots that followed the demolition of Babri mosque in December 1992.
Mr Dutt said that after he heard of the Mumbai serial blasts and Samir Hingora and Hanif Kadawala's arrest, he asked his friend Yusuf Nulwalla to destroy the rifle.
The actor's arrest followed. He was charged under the stringent Terrorist and Disruptive Activities (Prevention) Act or TADA for conspiracy in the blasts and receiving weapons from Abu Salem.
Filmmaker Mahesh Bhatt, who visited Mr Dutt at Mumbai's Arthur Road jail, says, "Very few people go through this kind of a phase and are able to pull themselves out of it. I saw him at the Arthur Road jail. That was a broken Sanjay Dutt. It was impossible to fathom then that the man will be able to mend his fractured life. What he has done today is a miracle."
Mr Dutt was able to leave jail after 18 months. For his release, father Sunil Dutt, a loyal Congress politician, turned to Shiv Sena chief Bal Thackeray for help.
A bigger relief came 11 years later. A TADA court, in November 2006, observed that Mr Dutt was not a terrorist and had acquired the gun for self-defence.
Mr Dutt was acquitted under TADA, convicted under the milder Arms Act and handed a six-year jail sentence. The Supreme Court granted him bail later.
But there were murmurs that Mr Dutt got away because of political pressure allegedly exerted by his family.
Retired senior police officer YC Pawar, who handled the initial investigation in the serial blasts case, says: "I think there was political pressure. How is it that all the accused get convicted in one kind of case and only one is tried under a different one?"
Defence lawyers have also questioned why the CBI did not challenge Mr Dutt's acquittal. But friends like Mahesh Bhatt say the actor has paid the price and hoped he would be let off.
There's a lot at stake for Bollywood -- three films, Policegiri, Zanjeer and Peekay, starring the actor are under production, and nearly Rs 70 crore is riding on him.