When B-grade horror film director Hariman finds himself in debt with notorious gangster Ponty Khurana, he decides that the only way to repay the money would be to shoot another one of his legendary, low-budget, so-bad- that-they- are-bad horror movies.
Shooting begins on Shaitaan Haveli, the film. On set, yesteryear actor, Mukesh feels insulted because he isn't getting the respect he deserves. Slighted, he ends up making a deal with someone more fearsome than any of the villains in the script.
Hariman tries to replace Monty with Rahul as the lead for his film but it only leads to further complications. A horrendous accident takes place on set. Hariman chooses to bury the problem and keep shooting. But some problems can't be buried for too long.
Monty finds out about Hariman’s plan to replace him and ends up getting Rahul fired from the film. Rahul finishes his role and the prophecy of Kali Pahadi with his last scene. All hell breaks loose on set with the appearance of a long dead character.
The gang finds out the identity of Ravi's killer. Prarthana is kidnapped. Ramu Kaka tells them an extraordinary tale. Rahul may have been a side actor in Hariman's script but he's the hero in Ramu Kaka's story. At Kali Pahadi, Chandaal's life gets a sequel.
Ramu Kaka reveals the only way to kill Chandaal: The Chaarshool. Rahul and the gang head off to the temple to retrieve it, only to have an unholy encounter. Hariman decides to keep filming. Meanwhile, Prarthana now sees an opportunity in the arms of Chandaal, much to the hatred of Mahua.
Chandaal is besotted by Prarthana and ends up casting out Mahua. The gang hatches a plan to slay Chandaal but are undone at the last minute. They are apprehended and Chandaal decrees that they be killed. Chandaal then fulfills the prophecy and unleashes hell on earth.
Rahul and the gang desperately try to get hold of the Mani and end Chandaal's control of his zombies. Chandaal and Rahul have a final face-off in the Haveli. Hariman manages to finish his film. The Mani finds its way to a new owner.