Contaminated food supplied by a UK charity has made hundreds of people severely ill at a camp for Iraqi civilians who have fled Islamic State and fighting in Mosul.

More than 200 people needed hospital treatment in the provincial capital, Erbil, and other nearby towns, while nearly 600 others were treated in the camp itself after eating the contaminated evening meal on Monday.

Dozens of buses and ambulances arrived in the night to ferry victims away for treatment, many of them families who had recently risked their lives to flee Isis-controlled areas of Mosul, or intense fighting in the city’s heart.

“It is tragic that this happened to people who have gone through so much,” said Andrej Mahecic, from the UN’s refugee agency, UNHCR. The UN runs the camp and 12 others in the area with Iraqi authorities, providing a haven for people displaced by the long campaign against Isis.

The food handout was funded by UK-based Help the Needy Charitable Trust, which said it raced doctors and other medical support to the camp as soon as it was told of the poisoning outbreak.

The charity has been working in Iraq for many years on medical and other relief projects, and had ordered the meals of chicken, rice, beans and yoghurt for the holy month of Ramadan, when Muslims fast during daylight hours.

Around 2,000 meals were sent to the Hasansham U2 camp for the evening iftar meal, when the fast is broken just after sunset. The first victims reported stomach cramps, vomiting and diarrhoea within hours of eating.

Television images showed listless children and adults hooked up to IV drips being treated for severe dehydration in a tent used as a makeshift treatment area. Some appeared to be doubled over, apparently from stomach cramps.

“Ten of my family were poisoned,” said one woman who had an intravenous drip in her arm. Beside her another woman cradled in her arms a child gasping with pain.

Local doctors and health officials initially said a woman and a child had died as a result of eating the contaminated food but later apologised for providing inaccurate information, and said there had been no fatalities.

Help the Needy said they would continue to support the victims, and were taking action against the restaurant contracted to cook the food.

“We have managed to treat more than 90% of cases while a few more serious cases have been transferred to the local hospitals in Erbil for treatment,” said Ali Khalid, international projects manager for the charity.

“Our association has begun the process of taking legal action against the restaurant, which was fully responsible for cooking and preparing meals. The owner himself was arrested by the security authorities in Erbil province.”

Iraqi police are investigating the incident, according to the UNHCR. They are understood to be looking at whether the food was contaminated before arriving at the camp, or after delivery.

“We are waiting for the police investigations to understand clearly the chain of events and to draw lessons from this tragic incident … to prevent such situations in the future,” the agency said.

There are around 6,000 people living at the camp, which opened in May, and has capacity for another 3,000. It is the most recent addition to a network of temporary refugee camps that now ring Mosul.

More than 700,000 civilians are thought to have fled the months-long battle to reclaim Iraq’s second city from Isis control, although some are slowly returning to areas in the east of the city that were liberated months ago.

The UN has said up to 200,000 more could leave as the fighting intensifies as Isis fighters continued to be pinned down in shrinking territory.

Many of the camps designed to house the refugees are already overcrowded, with conditions made worse by the fierce summer heat. Both funds and personnel are stretched thin, and the UN and the Iraqi government are struggling to maintain acceptable living standards.

Charities had been banned from bringing food from outside into the camp where the food poisoning occurred, camp supervisor Rizgar Obed told local Rudaw news agency, but the rule was relaxed because of the scale of the crisis.

Mosul fell to Isis in the summer of 2014. It was a devastating loss for the government and a financial, military and propaganda coup for Isis who raided banks, seized military equipment and ordered its 1 million inhabitants to follow its extremist interpretation of Islam.

It was where the head of the group, Abu Bakr al-Baghdadi, made his only known public appearance, climbing the pulpit of the historic Nouri mosque to announce the formation of a self-styled caliphate stretching across Syria and Iraq.

That mosque is one of just a few areas still under the group’s control, in and around the Old City, on the western side of the Tigris river. Baghdadi’s own reputed stronghold, Ba’aj, has also fallen to government forces in recent days.