LONDON — A British newspaper reported yesterday that it found children as young as 10 making clothes in a sweatshop in New Delhi, India, that the Gap Inc. fashion chain planned to sell in the West. The Observer quoted the children as saying they had been sold to the sweatshop by their families in Indian states such as Bihar and West Bengal and would not be allowed to leave until they had repaid that fee.

Some, working as long as 16 hours a day to hand-sew clothing, said they were not being paid at the unidentified Gap supplier because their employer said they were still trainees.

The clothing retailer said the sweatshop was being run by a subcontractor hired in violation of Gap’s policies, and none of the product made there will be sold in its stores.

“We appreciate that the media identified this subcontractor, and we acted swiftly in this situation,” a Gap spokesman, Bill Chandler, told the Associated Press yesterday. “Under no circumstances is it acceptable for children to produce or work on garments.”

The Observer quoted one boy identified only as Jivaj as saying that child employees who cried or did not work hard enough were hit with a rubber pipe or had oily cloths stuffed into their mouths. The paper said the sweatshop, or “derelict industrial unit,” that it found during its investigation in New Delhi was “smeared in filth, the corridors flowing with excrement from a flooded toilet.”

The Observer printed a photograph of one of the child workers, and British Broadcasting Corp. television broadcasted what it said was footage of the youngsters taken at the sweatshop by an unidentified German TV crew.

According to a statement issued yesterday by Gap, the San Francisco-based company first learned of the child labor allegations from the Observer last week.

An Indian vendor assigned work on an item for the company’s Gap-Kids line to an unauthorized subcontractor “in direct violation of our agreement,” the statement said. “As soon as we were alerted to this situation, we immediately began an investigation,” the statement said. “In addition, we took immediate steps to stop the work order and to prevent the product from being sold in our stores.”

Gap did not immediately cut ties with the supplier it accused of improper subcontracting, but Mr. Chandler said the company was taking the breach of its child labor policies “extremely seriously.”