Prof. Prabhakar Anand (Amitabh Bachchan) is the principal of a college and is very idealistic. He has a soft corner for the financially weaker community of students including the Dalits. He runs special coaching classes at his house free of cost for the needy students. He has a strong liking for Deepak Kumar (Saif Ali Khan), his student, who soon starts teaching in his college as a stop-gap arrangement before he goes away to America. Deepak and Poorbi (Deepika Padukone), daughter of Dr. Prabhakar Anand, are in love with each other. Sushant Seth (Prateek Babbar), who belongs to the high caste and rich class, is one of the students of the college.
One day, soon after the Supreme Court has upheld the quota system of the government, there is tension in the college between students of the economically backward classes, who stand to gain because of the quota policy, and of the affluent class, who now have to contend with the reservation policy in spite of otherwise being comparatively more merit-worthy. This prompts vice principal Mithilesh Singh (Manoj Bajpai) to call the police to control the situation, something that doesn’t go down well with Prof. Anand who pulls up Mithilesh Singh for his hasty act of summoning the police on the college premises. Close on the heels of this incident, there is a war of words between Mithilesh Singh, Deepak Kumar and Sushant Seth. Prof. Anand suspends Sushant and also asks Deepak Kumar to get out when Deepak refuses to calm down and instead, emotionally hurt as he is a Dalit, speaks rather rudely to Prof. Anand, even accusing him of casteist behaviour.

The face-off between Prof. Anand and Deepak Kumar leads to a breakup between Deepak and Poorbi who asks him to apologise to her father or forget her forever. Meanwhile, the trustees of the college in cahoots with Mithilesh Singh manipulate things in such a way that Prof. Anand is asked to step down from the principal’s post when he questions Mithilesh Singh about the private coaching classes he runs as his side business in spite of the college rules not allowing him to do so. What’s worse, Mithilesh Singh teaches in his coaching classes during the time he ought to be in college. Once Prof. Anand is thrown out, Mithilesh Singh is promoted as the new principal.
Further humiliation awaits Prof. Anand. A house he owned and had, on humanitarian grounds, allowed his friend’s two sons to use to run computer classes, is given on rent by the two sons to Mithilesh Singh to run his coaching class. Prof. Anand is not just against the business of coaching classes but is also angry with Mithilesh Singh for having played dirty politics with him. But now, he has to see his own house being used by the very Mithilesh Singh for the very business he detests, which, incidentally, is flourishing. Homeless now as the accommodation provided by the college has had to be vacated by him, Prof. Anand is at his wits’ end.
He soon starts coaching students for free, in a cow shed which is bang opposite his own house (occupied by Mithilesh Singh for running his coaching class). Deepak Kumar, who has gone off to America, returns to India on learning about Prof. Anand’s state. Sushant, too, comes to support Prof. Anand when he realises that Prof. Anand is indeed a genuine man.
In the end, Professor Anand's free coaching classes in the cow shed attract students from various backgrounds, poor to the rich with a vast exodus from Mr. Singh's KK coaching, as Prof. Anand's unique style of teaching has impressed upon students and led them to success in board exams. Threatened by Anand's success in attracting students and generating media attention, Singh utilizes his political and police connections to destroy the cow shed on the grounds of illegal usage of government property. While the bulldozers are on the march to destroy the cow shed, Mr. Anand gives an emphatic, emotional filled speech, aiming to alert the general public of individuals like Mr. Singh who aim to exploit the differences of individuals based on their economic standing and educational opportunities. In the end, Mrs. Shakuntal Thakral (Hema Malini) returns from her retirement place in Rishikesh and stops the activities of Mr. Singh by placing a call to the state Chief Minister. Mrs. Thakral is impressed by the effort of Mr. Anand and commends him for his leadership in face of adversity. She urges him to enter a new phase of life, by becoming in charge of a new remedial center that will be financed by her trust fund and will aim to provide free tuition courses to those who desire a bias-free education. The film ends with the inauguration of the "Shakuntala Thakral Remedial Center"

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