A 10-member jury headed by noted filmmaker Vinod Pandey, recommended to the Film Federation of India that "Paheli" be nominated as India's official entry for the foreign film category.
The Shah Rukh Khan-Rani Mukherjee starrer beat 14 other films including "Swades", "Veer-Zara", "Black", "Parineeta" and "Mangal Pandey".
The film, based on Rajasthani folklorist Vijay Dan Detha's Hindi novel "Duvidha", narrates the tale of a ghost who falls in love with a newlywed bride.
While the film received guarded praised from critics, it failed at the box office.
In recent years, Ashutosh Gowariker's "Lagaan" starring Aamir Khan, Sanjay Leela Bhansali's "Devdas" starring Shah Rukh Khan and Marathi film "Shwwas" were nominated for the coveted international award, but they failed to produce India's first foreign film Oscar.