The US star had been approached for a role in the film opposite Aamir Khan, reports Mid Day.
"The producers were looking for an international face since some time, as this is touted to be the biggest film of the franchise till date," a source claimed.
Graham was reportedly Yash Raj Films' first choice for the movie, over Natalie Portman and Eva Longoria.
"They were pretty convinced that they would be able to rope in one of the leading ladies from Hollywood to star opposite Aamir. In fact they had a few meetings with Heather's managers, but for some reason things did not work out," added the source.
Graham said in November that she was in talks to feature in a major Bollywood production.
However, she suggested that the undisclosed project would feature Shah Rukh Khan not Aamir Khan.