Danish officials met those from India's Ministry of Home Affairs on the matter on Thursday.
Three years ago, a Danish court said Davy would not be sent to India owing to widespread violation of human rights in the Indian jails. The Danish government did not appeal against the verdict in the Supreme Court despite appeals made by New Delhi. The latter reduced its diplomatic relations with Copenhagen in return.
Sources said the Indian government was also trying options on whether Davy could be tried in Denmark and even imprisoned there, in case he is convicted.
Davy was on board an An-26 plane which was piloted by a British called Peter Bleach and had five Latvian crew members besides four tons of ammunition which was dropped in Purulia. The CBI had claimed that the arms were meant for a sect called Ananda Marg to help them stage a revolt against the state's the then communist government.
The aircraft was tracked by the Air Force and made to land in Mumbai. Bleach and the other crew members were imprisoned but Davy had fled. Bleach and others were, however, released later allegedly under pressure from Russia and the UK.
Davy was tracked in Denmark in 2001. The government then had agreed to send him to India in 2010 but he moved a local court against the decision and won the case.