according to producer vikas mohan on 28th november 2014:

The producer says that he intends to release the film soon. "Its release got stuck 26 years ago though we were not at fault. At that time, two or three of Gulzar saab's films failed at the box office and distributors didn't want to release this one either. They had also demanded their money back but I had nothing to give then. I could pay them only after Arzoo released in 1999. But now the time for Libaas has come," he adds.

Wow! I didn't even know that this film was made. I have loved the songs for many years. Would be an interesting film to watch.

film was fully completed back in 1988 it was screened at IFFI GOA in january 1992 and after a gap of 22 years it was screened by IFFI again on 22nd november 2014

old vhs trailer of the movie can be viewed on youtube

They'd be better off releasing this straight to DVD - I don't think many people would go to watch it in the cinema.