Like Mani Ratnam's Roja, Lajja is another gender-bending twist twist on the Ramayan: Vaidehi (princess of the kingdom of Videha, i.e., Sita) has followed her husband Raghu (note the substitution -ma/-ghu) into exile (she has come with him to New York). Like Ram, Raghu abuses his wife. Unlike Ram, though, Raghu can't appeal to public morality to justify his poor treatment of an innocent woman. He beats her, screams at her in a rage, "Go back to India!" He calls her "old-fashioned" because she expects to be treated with respect, as we are taught to believe that Ram treated Sita. We will see in the rest of the film, though, that the treatment of women in this story, and in the real life that it represents, has much in common with Ram's treatment of Sita and this treatment (at least from book VII, part 24 of the Ramayan) seems anything but respectful.

Vaidehi does go back to India, to her parents' house. But she can no more find respect there than she could in New York: Her family rejects her for having deserted her husband; she has violated the script of the Ramayan which requires that she remain in exile and treat her husband as a god. Here we see the dark side of the Ramayan's formula, one that will eventually result in Ram's sending his faithful and virtuous wife into a pit of fire, then banishing her, pregnant, to the wilderness across the Ganges.

When an accident deprives Raghu of the ability to father a child, and he learns of Vaidehi's test results showing that she's pregnant (she's becoming more and more like Sita), he schemes to get her back to New York to bear his heir. At first credulous of his apology, Vaidehi wises up after speaking with her doctor by mobile, and flees the airport, chased by Raghu's henchmen. In a dark alley she meets the thief Raju, who shelters her, and then they both escape by blending in with — what else, in a Hindi film! — a wedding party. It's Maithili (princess of the city of Mithila, i.e., Sita again), about to be married to her college sweetheart, who turns out to be a complete tosser, a spineless daddy's boy whose arrogant family is ruining Maithili's long-suffering father with their demands for more and more wedding expenses and dowry. Raju, the good-hearted outlaw, has a Han Solo moment: at first he thinks to escape India with his stolen money, but on witnessing a prostitute selling herself to save up her sister's dowry, he returns to the wedding and slips his stolen money into the dowry to make up the deficit. The notes have been marked, though, and Raju is found out. Maithili can no longer tolerate the bridegroom's family's abuse of her father, and tells them off. In response, it's revealed that she has allowed Raju to hide in her room for an hour, alone with her. Like Sita after her proximity to Ravan in Lanka, Maithili after her proximity to Raju in her room is viewed as unclean and dishonoured, even though she has behaved honourably. Her father complains that his life is over — as if this disaster were her fault!

Still on the run from her husband, who is pursuing her around India as Ram pursued Sita to Lanka, Vaidehi next lands in Raju's village where she meets Janki (daughter of King Janak, i.e., Sita), an actress who is pregnant by her lover Manish and plans to marry him and to go with him to Delhi. The theatre director Puroshottam, whose very name conveys him as a stand-in for all men in general, lusts for Janki as Ravan lusts for Sita, and claims to have lain with her. The rumour gets around, just as the people of Ayodhya whisper that Sita must have lain with Ravan. And where Ram accedes to this popular prejudice but knows it to be false, Manish actually doubts the paternity of the child that Janki carries, and casually tells her that she can abort the pregnancy so that he can go to Delhi alone. Manish's demand that Janki be left behind in the village is thus a more selfish version of Ram's order that Sita be left behind on the far bank of the Ganges.

Ironically, Manish and Janki are playing the leading roles in a production of the Ramayan. When Manish as Ram demands of Janki as Sita, on stage, that she undergo the Agni Pariksha, the trial by fire, Janki can no longer separate the theatrical script that she is acting on stage from the social script that she is being expected to follow in real life. She as Sita tells off Manish as Ram, and the audience, enraged at the blasphemy, riots — just as we saw in the reactions of Vaidehi's family and Maithili's father, one does not violate the script of the Ramayan. The enraged audience beats Janki, and she miscarries and is carted off to a mental hospital. As Puroshottam has informed Vaidehi's husband of her whereabouts, Vaidehi flees again, this time by train.

When the train is robbed by bandits, the swashbuckling local outlaw hero Bulwa saves the day by bloodily killing every one of them. Bulwa is the embodiment of the male hero — he handles the fighting and killing that female characters are not permitted to enact in Bollywood. Yet he worships "the Goddess" (i.e., Lakshmi, the one whose avatar is Sita), and there seems something supernatural about his comings and goings. Vaidehi faints at the blood, and recovers in the house of Ramdulaari (beloved of Ram, i.e., Sita).

Ramdulaari is another violator of the script. She educates the local girls and women, teaching them subjects such as computer skills, and this angers the village leaders Virendra and Gajendra. When Ramdulaari's son Prakash is revealed to be in love with Gajendra's daughter Sushma, Gajendra is enraged and vows to have Prakash castrated. Sushma learns of the plan and tells Ramdulaari, who becomes angry not with Gajendra for threatening to castrate her son but rather with Sushma for falling in love with her son — just as Maithili's father saw the failure of the wedding as her fault: in each case, it's always the fault of the virtuous women and never the fault of the selfish men. When Prakash escapes with Sushma, accompanied by Vaidehi, Gajendra holds death rites for his daughter Sushma, and forces his wife to follow the script by scattering flowers on her shrine. As revenge, he and his men gang-rape Ramdulaari and burn her alive — as in some tellings of the Ramayan Ravan rapes Vedavati who then immolates herself before being reincarnated as Sita. This brutality draws the wrath of the goddess Lakshmi, in the person of Bulwa (because, again, the Bollywood script prohibits female characters from physical vengeance), who kills Virendra.

The climactic scene takes place as Gajendra is about to be honoured as a politician. Vaidehi interrupts his speech to expose him as a rapist. The women in the audience riot, attacking Gajendra and corroborating Vaidehi's accusation. Gajendra is carted away by the police. So far so good, but here is where the Bollywood script takes hold again: the audience of this film, sitting in this very cinema in which you and I are watching it, will not tolerate a non-fairytale ending — just as the audience of the Ramayan would not tolerate Janki/Sita's refusal to endure the Agni Pariksha. Santoshi knew that he wouldn't be able to get the ending that he wanted past a prejudiced audience that demands that a Bollywood film follow the formula. So he slapped a traditional ending onto his film, but left the play-within-the-film as an indicator of what the ending ought to be. Audience members in the know can, therefore, imagine the film ending here, with a defiant Vaidehi fighting on.

For that majority of audience members who are not in the know, though, the film provides an acceptable denouement in which Vaidehi returns to her contrite husband and all the major characters reunite and live happily ever after in New York, where they send money back to India to support women's rights groups. Fin.