The film of Salman Rushdie's novel Midnight's Children – a love letter to India – has failed to find a distributor in the country

It is an epic portrayal of the country's modern history and one of its best-known books of recent decades. But a film adaptation of Salman Rushdie's novel about India after independence, Midnight's Children, has plunged the author into new controversy in his native land.

Speaking at the film's premiere in Toronto at the weekend, director Deepa Mehta revealed that no Indian film distributor has so far bought rights to the film.

"Salman has often said that the book was his love letter to India. I think the film reflects that love. What a pity if insecure politicians deprive the people of India to make up their own minds about what the film means, or does not mean, to them," the Hindustan Times, a leading Indian newspaper, has quoted the Indian-Canadian director as saying.

The film follows the narrative of the original novel and includes unflattering portrayals of top Indian political figures. Cinema experts in the subcontinent said the failure to find a distributor revealed a weakness in Indian democracy.

"[In India] we are very wary of any film that even is political, let alone politically sensitive. Any resemblance to a politician … could be a problem. In a robust democracy, all of this should be possible," said Shubhra Gupta, a respected local film writer.

Rushdie's relationship with India has often been troubled. His controversial 1988 book The Satanic Verses, which provoked a religious opinion or fatwa, from the Iranian leader Ayatollah Khomeini calling for the author's killing as punishment for blasphemy, is still banned in India. In January, an appearance by Rushdie, 65, at the Jaipur literary festival had to be cancelled after protests from Indian Muslim groups. The incident provoked fears for free speech in India and criticism of the government.

Midnight's Children was published to massive acclaim in 1981. It describes the life of a boy born with magical powers at the exact moment of India gaining its independence in 1947. A broad colourful allegorical sweep through 30 years of history and social change, the work won the 1981 Booker prize and the novel was later awarded the Best of the Booker, through a poll of readers. But its deeply negative portrayal of the late prime minister Indira Gandhi and her suspension of democracy in India between 1975 and 1977, a period known as The Emergency, led to the author being sued by the former premier for defamation.

The current president of the ruling Congress Party, Sonia Gandhi, is the widow of Indira Gandhi's son Rajiv. Her son, Rahul, is seen as a potential prime minister.

The present Indian government repeatedly reacts strongly to criticism. Last week an article in the Washington Post's description of prime minister Manmohan Singh as an ineffectual and tragic figure caused a storm. In 2010 ministers explored the possibility of suing the author of a romanticised novel portraying the life of Sonia Gandhi.

One Indian reviewer compared the Indira Gandhi portrayed in the film adaptation to a "Lord Voldemort-like politician with dark grey clouds hanging over her head". Rushdie himself wrote the screenplay.

"Anything and everything might stir ire …. What is the point of spending an enormous amount of money … if you have any worry?" asked Gupta, the critic. The Press Trust of India criticised the film for its "exotic India package – snake charmers in red turbans, magicians who say abracadabra and slum dwellers who speak pukka English".

The PTI said director Deepa Mehta "slathers on the chutney much thicker than even [Oscar-winning film] Slumdog Millionaire, directed by Danny Boyle, who is British".

Other reviews have been broadly positive however. Producers did not seek permission to film in India, choosing instead to make the movie in Sri Lanka. Attempts by the Iranian government to close down production of the film halted work for several days. The film is booked to be screened in 40 countries.

Rushdie's memoirs are to be published later this month. According to the Sunday Times, Rushdie, who refers to himself in the third person in the new book, describes staying in dozens of different safe houses across Britain after being forced into hiding by the threat of assassination. His first weekend after Khomeini's fatwa was spent in a bedroom in a small hotel in Worcestershire. He later moved to his literary agent's cottage, a bed and breakfast in Wales run by a former policeman and finally to the Bishops Avenue in north London, one of the most exclusive addresses in the capital. Rushdie left the UK for New York in 2001.

• This article was amended on 13 September 2012 because the original said Midnight's Children won the Booker of Bookers through a poll of readers. It was awarded that prize by a panel of judges and later won the Best of the Booker through a poll of readers. The article was further amended on 9 October 2012 to correct an editing error that attributed a quote saying that the film of Midnight's Children "slathers on the chutney" to its director, rather than to the Press Trust of India.