1) You can make complaint against that family and file defamation case via Lawyer by sending first notice to them.

1) issue legal notice to BIL wife and his family to with draw false and defamatory allegations made and to tender an unconditional apology 

2) if they refuse file complaint of criminal defamation under section 500 ofIPC 

3) you can also file suit for damages 

There is two mode for filling defamation case

(1)to file petition before local Police for fIR

(2)civil suit for which notice is required before filling plaint,and court fee is payable as per quantum of damage caused by such defamation

You can file a civil and criminal prosecution of defamation against them

A case for defamation can be filed in the district court and would be heard by a judge who will issue notice based upon your application. The trial would begin and the evidence you have would be sufficient to implicate them.

Regards 

1. You can file a Police FIR, requesting investigation and charge-sheet, for offences like cheating, intimidation, harassment, defamation against the person, supported with all relevant supporting documents.

2. IF the Police does not take action, THEN you can file private criminal case u/s 156(3) Cr.P.C., in the local Magistrates court, seeking directions to the Police to investigate and file charge sheet. The said Person may come down for settlement.

if they are spreading the rumours you surely can file a suit for defamation against them but for proving defamation you need to prove that an act has been done to harm your reputation publically.

phone recording can be submitted but alone would not be sufficient.....

Dear Madam,

Yes, you can file defamation case because it lowers your image in the family circle which is more important for a person to survive.  If such rumors are circulated then you cannot attend social functions and if attends you have to face insults.  It is a social stigma falsely created by them.  You have to file before magistrate court through advocate u/s 500 Cr.P.C.  First convert some conversations into text form and give big list of witnesses who received such phone calls.

Dear Madam,

- You can file the defamation case U/s 499 of IPC incase below mentioned condition is matched -;

    " Whoever, by words either spoken or intended to be read, or by signs or by visible representations, makes or publishes any imputation concerning any person intending to harm, or knowing or having reason to believe that such imputation will harm, the reputation of such person, is said, except in the cases hereinafter expected, to defame that person."

- Please note it must be in public forum not in personal.

- Besides incase you are looking for some compensation under defamation, you can file the petition under " Suits for Damages" 

- Local lawyer shall be able to help you to understand further proceeding. 

Incase needed any assistance, feel free to connect. 

Regards

Vivek Arya

If you have documentary evidences to prove their rumors that are spread in the society to defame your names and spoil your reputation you may proceed with the plan to file a defamation case against them.

Without any substantial evidence even the court may not entertain any such case hence better accumulate the evidences before filing the case.