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Born in Waltair (now Visakhapatnam), Devika Rani came from a distinguished background: she was the great-grandniece of the Nobel Laureate Rabindranath Tagore and her father, Col. M. N. Chaudhuri, was the first Indian Surgeon-General of Madras. Her mother's name was Leela.

She completed her early schooling in the early 1920s. She then studied drama at the Royal Academy of Dramatic Art (RADA) and the Royal Academy of Music in London, UK, where she won scholarships. She also studied architecture, textile and decor design, and apprenticed under Elizabeth Arden. Here, through her Brahmo connections, she met with scriptwriter Niranjan Pal who would eventually write many of her most successful screen roles.

Devika Rani married Indian producer and actor Himanshu Rai in 1929. Together they starred in Karma (1933). They soon founded the Bombay Talkies film studio, along with retainers Niranjan Pal and Franz Osten, whose films challenged the caste system. In addition to Devika Rani, other notable actors to work for Bombay Talkies at one point or another included Ashok Kumar and Madhubala.

The Dadasaheb Phalke Award is India's highest award in cinema given annually by the Government of India for lifetime contribution to Indian cinema.