I am falsely accused of owing money and am being threatened

Dear Sirs, I had been destroyed by a fire completely and at that time a friend of mine offered me to work for him for Rs. 30000/- per month. i worked for him for 3 years and 7 months and he payed me a total of Rs. 13,00000/- over the period for services rendered to him and wrote down the amount on a plain chit of paper. a couple of months back, i said i would not work for him anymore as i wanted to start my own business.he tried to pressurize me to continue but i refused. thereafter he suddenly started stating that the money he paid me was a loan and i was to pay it back. he once came with some goons and i called the police. later on 2nd december,2015 night at around 12;30 midnight, he came and started hurling abuses and threats from below the complex i stay. i filed a complaint with the police on 3/12/2015 after which the harassment and threats stopped but he kept contacting my relatives and friends with the chit of paper and spreading that i am not paying debt to him. Two days back i got a call from the police station and when i went there, i was advised to sit with that person and amicably settle the matter within 4-5 days else they would start a case against me i would be arrested for not paying up.i am baffled and confused. please advise. thanks and regards.