Amal, a modern day morality tale by Toronto-born Richie Mehta, was awarded the German star at the fifth Bollywood and Beyond, the country's only festival of Indian cinema.
Mehta's debut film Amal was a festival favourite for heart-warming performances by thespians Naseeruddin Shah and Roshan Seth in a tender tale about a poor man with a rich attitude.
"The message of Amal is magical. The film has forced me to redefine poverty and wealth," Marianne Gassner, jury member and executive director of Stuttgart's Film Commission told IANS during the award ceremony as the festival concluded Sunday night.
The German star is the highest award given for the best feature film and includes a cash prize of 4,000 euros.
It's a Boy was the favourite documentary of the jury, earning the first European accolade for Delhi-based filmmaker Vani Subramanim who returns home with a cash prize of 1,000 euros.
"This is a very exciting time for documentary cinema. In the future I hope to see the genre recognised for all the other aspects that go to make a documentary including content, form and music," Subramanium told IANS.
"The filmmaker's gentle treatment of a very grave theme impressed me very much," said Selvaggia Velo, jury member who voted for It's a Boy a non-fiction film that explores the cultural causes of why a majority of Indians rejoice when a boy is born in the family and the alarming rate at which baby girls continue to be killed and aborted.
The next film by Subramanium is on the power of food that brings people together and also keeps them segregated on the basis of gender, caste and social status even in this day and age.
Out of 13 films screened on topics as diverse as women boxers and the dying art of storytellers, Vishal Bharadwaj bagged the award in absentia in the short films category.
Blood Brothers, a 13 minute film by Bharadwaj, was shot in 2007 for the AIDS Jaago project founded by fellow filmmaker Mira Nair. It received 1,000 euros.
Thoda Pyar Thoda Magic added glamour to the festival that attempts to go beyond Bollywood and to give a glimpse of the diverse range of cinema made in India.
Out of 20 feature films screened here, four were mainstream Bollywood, including Jodha Akbar, Chak de India and Hum Tum.
However Kunal Kohli, director of Thoda Pyar Thoda Magic, stole the heart of the audience as he stayed back after the screening of his latest film for a lively question and answer session.
"This is my first visit to Germany and I am delighted at the warm response to my film here," the director said who was repeatedly questioned as to when he will make a film with Shah Rukh Khan.
Kohli would like to see a more healthy distribution of Bollywood films in Europe.
"It makes no sense for fans here to see most Bollywood films on pirated DVDs," Kohli said.
"I shed tears in true Bollywood style as the lights dimmed and Thoda Pyar Thoda Magic began," programme director Wiebke Reiss told IANS.
Reiss said that for the past three years she was trying to get a film produced by Yash Raj Chopra and was so overwhelmed during the German premier of Thoda Pyar Thoda Magic at the festival here that she burst into tears.
Another reason why the organisers are rejoicing this year is because the number of audiences from all over Europe has steadily increased to nearly 12,000 this year.
"It is a matter of great satisfaction for me that the response to non Bollywood cinema is proving to be as popular," Reiss concludes.
Apart from 56 films screened over a period of five days, parallel events included a location tour around Stuttgart and production meetings for Indian directors and producers.
An Indo-German business forum concentrated on improving commerce between the two countries while fans nodded when glamorous socialite Shobha De suggested that Bollywood is the best bridge between the people of India and Germany.