An Indian man who held two dozen children hostage at his daughter's birthday party was shot dead by police before locals beat his wife to death as she tried to escape.

All 23 children, the youngest was aged six months, were rescued as anxious parents gathered outside the house in the northern state of Uttar Pradesh last night.

The man, identified as Subhash Batham, was demanding that murder charges against him be dropped as well as a ransom of 10 million rupees (€127,000) per child, policeman Amit Mishra told AFP.

"He fired several rounds, injuring a few persons," Mr Mishra said.

"We tried to negotiate with him but to no avail. Concerned over safety of the children, we eventually broke open the rear door of the house and shot him."

The man, who was apparently celebrating his daughter's first birthday, was out on bail over the murder charge.

Local media reports in Farrukhabad district said commandos had been flown in and were kept on standby.

The man's wife was killed as she tried to run away.

"She was rescued and taken to the hospital, but she succumbed to her injuries," Mr Mishra said.