The film - titled "Parveen Babi" with newcomer Amrita Dhanoa playing the title role - will expose the late actress's "well-wishers and friends" who exploited her to the hilt, claims Ahlawat.
"I want to show how people misused a small-town girl. First, they exploited her emotionally, then physically and later financially. And once their purpose was served, they dumped her," Ahlawat told.
Ahlawat says his story is authentic because he wrote it after speaking to Parveen's nieces - Anisha and Verona Babi - at length.
"In a recently released film, she was shown as a mentally disturbed girl since she was a kid. But this is not true. She was not a mad person. My film will show the real Parveen Babi."
The actress, who reportedly suffered from schizophrenia, was a recluse in the last years of her life. She never married but reportedly had intimate relationships with Bhatt, Kabir Bedi and Danny Denzongpa. She was also rumoured to have a relationship with co-star Amitabh Bachchan.
Asked about his film's USP, Ahlawat said: "The story, music and locations are the highlights of my film."
Being shot in Delhi, the film is directed by Sandeep Kumar, who is the nephew of yesteryear's popular actor Pradeep Kumar. With music composed by Dilip and Samir Sen, the film is scheduled to hit the screens next month.
Mahesh Bhatt's film "Arth" had cast the late Smita Patil as Parveen in 1982. In the more recent "Woh Lamhe", Parveen was played by Kangana Ranaut.