In a statement issued on Facebook, the Finance Minister said that Mallya's statement is "factually false".
Before attending the Westminster Magistrates" Court, the former Kingfisher Boss was inundated with many journalist questions and to one of their asks, he said "I left because I had a scheduled meeting in Geneva.
The charge was immediately denied, following which Mallya backtracked and said that there was no formal meeting.
"Today we have a categorical assertion by Mallya about the number of times he met the finance minister to have some resolution of his dues with banks". "Absolutely shocking. PM Modi meets Neerav (sic) Modi before he flees the country".
On being asked if he has convinced the Court that he has the means to pay what he said he will, Mallya told media here, "Obviously, that is why a settlement offer has been made".
"He paced up to catch up with me and while walking uttered a sentence that "I am making an offer of settlement". Having being fully briefed about his "bluff offers", without allowing him to proceed with the conversation, I curtly told him "there was no point talking to me and he must make offers to his bankers".
Earlier in the day, Congress president Rahul Gandhi while addressing a press conference on the matter along with party spokespersons accused the finance minister of "colluding" with the fugitive liquor baron and demanded that he (Jaitley) should tender his resignation.
In 2016, Arun Jaitley had said that there is a legal process to stop somebody from going overseas.
Mallya has now been bailed to appear before the court on December 10, marking the conclusion of the year-long extradition trial which opened on December 4 last year.
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He said: "He (Mallya) had taken undue advantage of his (FM) presence in Parliament corridor".
Mr. Mallya, he asserted, had no credibility as he was under the "glare of law" and was a criminal. "Everybody gets paid off and I guess that's the primary objective", he said.
"I put nearly Rs 15,000 crore offer on the table of the Karnataka High Court".
"I am certainly a scapegoat, I feel like a scapegoat".
His lawyer, Clare Montgomery, told London's Westminster Magistrates Court that the Indian government had failed to provide any substantial evidence to justify extraditing him.
Mallya has been on bail on an extradition warrant since his arrest in April a year ago and is fighting extradition to India on charges of fraud and money laundering amounting to around Rs 9,000 crores.
He claimed that Rahul Gandhi was on the backfoot in the case of Kingfisher Airlines and its promoter Vijay Mallya as well as the entire Gandhi family traveled on the airline and their travel was upgraded to business class for free.