Alibhai tells the story of Anwar Ali (Mohanlal) known as Alibhai a King "Dadha" of Palayam market, Kozhikode. He is the unquestionable hero in that area and savior of the poor and downtrodden. The movie opens with the flashback sequences which establish young Ali, a member of a barami family famous for making Urus, who leaves his home in his childhood when his own father Ahmed Sahib (Innocent) mistakes him for an unexpected thief and beats him black and blue in front of people. Ali's friends Sundaran Thampi (Siddique), tells the mob he saw the theft which was actually done by himself for avenging his fathers rivalry with Ahmad Sahib. Ali knowing he was cheated by his friend grab the butcher sword and chops off his hand and flees from his home to the Palayam market. He never backs out from a fight where he grows up as Alibhai, an undisputed leader of the proletarian class, one who stands up to speak for them and even to clench his fists and fight for them and their rights. The son grows up to be a good-hearted toughie.