Let me see if I understood your statement: Do you mean to say that on the bio-data form filled in January 2004, his age was shown as 40 years on that date (and not 40 years when he joined in January 2004)? What it implies is, as of 2010, he is only 46 years old and hence years away from retirement.
Steps to Address Age Discrepancy
What should have been done in this case was to have a Medical Examination in 2004 (when this matter came to light) and ask the Doctor to estimate the age, which is considered valid. In case of any protests/dispute, the employee should submit certain documents relating to age like a certificate from the "gram panchayat," records from primary school, any court document relating to age, etc. You can subject the employee to a Medical examination, even now, and get a medical estimate of his age, and act accordingly. However, do remember to give the employee the benefit of the lower side of the range of the estimated age.
Warm regards.