British author Salman Rushdie on Sunday accused Indian police of making up an underworld plot to assassinate him that forced him to pull out of a literary festival this weekend.

Rushdie withdrew from the event in Jaipur, the state capital of Rajasthan, after being warned by Indian officials that paid gunmen were heading to the city to kill him for his writing that is alleged to insult Muslims.

But Rushdie said that he now believed the supposed plot -- apparently undertaken by Mumbai criminal gangs -- had been invented to keep him away from the festival and to avoid controversy.

"I've investigated, & believe that I was indeed lied to. I am outraged and very angry," Rushdie said on Twitter after newspaper reports that Rajasthan police had concocted the death threat.

Rushdie's 1988 novel "The Satanic Verses", which remains banned in India, is seen by many Muslims worldwide as a blasphemous work that insults their religion.

The author, who was born in Mumbai, spent a decade in hiding after Iranian spiritual leader Ayatollah Ruhollah Khomeini issued a fatwa in 1989 calling for his death over the novel.

Fellow authors at the Jaipur festival, which draws tens of thousands of Indian and foreign visitors, expressed their opposition to the campaign to stop Rushdie appearing, and said free speech needed to be protected in India.

Writers Hari Kunzru and Amitava Kumar read out passages of "The Satanic Verses" from the stage in protest on Friday, angering some local Muslim groups who had welcomed Rushdie's withdrawal from the programme.

Rushdie appeared at the festival without incident in 2007 but this year Muslim activists lobbied for him to be banned, raising fears of angry protests and security problems at the scenic venue in the gardens of an old palace.

Among more than 250 speakers at the popular five-day event are US chat show queen Oprah Winfrey, biologist and atheist author Richard Dawkins and Indian best-selling novelist Chetan Bhagat.

When Rushdie announced on Friday that he would not attend the festival, he said he had doubts about the accuracy of the intelligence reports but it would be "irresponsible" to ignore them.

Rajasthan police declined to respond to Rushdie's accusations, but they confirmed an official complaint from a member of the public was lodged on Sunday against the authors who had read out parts of "The Satanic Verses."

Aas Mohammed, head of the local police station, told AFP they were looking into the written complaint that said reading from the banned book was illegal and police should take action.

One hardline Muslim group earlier described reading the novel to the audience "a provocative act which may create trouble".

Festival organisers said they supported the right of freedom of expression within the law.