False allegations in a legal notice, what to do

My interior designer last payment was due. He hasn't finished his final work and there was one dispute for final completion of work. He started asking more than agreement money. I sent him email for final bill with all details. But he started asking same money. Now he sent me an email from lawyer as notice to pay the final money. In that he also mentioned that I abused and use filthy language for his SC/SC worker. Which was never happened. He also kept our keys and not returning even after several reminders. He said his lawyer told not to return keys. We asked over email and phone multiple times be he said no. He threaten us also. and even we mention that in email to him. This all happened before his notice in email. Now i have quest - 1 - Can a notice be sent over email ? 2 - As he mentioned I have used bad abusive language for his SC/ST worker, will that cause arrest for me ? 3 - Till now I haven't done anything. So what can I do now ?