Notice received stating false accusations.

This around 20 months old matter. I buy & sell old & new sewing machines. A woman willing to start tailoring work wanted to buy few second hand machines from me. She didn't had full money at that time, also she needed some time to get all kind of licenses & register her home as shop with the municipal corporation; she offered a token amount & asked for sometime to get things done & to pay the remaining amount. Usually there isn't a stipulated time frame for these kind of deals so considering the credit period of 15 days what I give to others I offered her the same limit. But she insisted on more time as the formalities to start a shop was a time consuming process, she asked for 3 months. As I also wanted my old machines to get sold for a reasonable amount & as that woman seemed genuinely needy I agreed for the deal. I accepted the token amount 25k & made an instant written agreement on a letterhead & got it signed by the woman & a witness from her side. It was agreed that if she fails to pay the remaining amount in the given 3 months time then the token money will not be returned and the same was clearly mentioned in the hand written agreement. We agreed to get this same agreement typed & notarised on stamp paper later in the week but she failed to come on several occasions for getting the notarised agreement made. I thought I'm on the least risk & she should be more concerned for her money so I also got busy & forgot to call her after 3 or 4 times. In this whole thing the 3 months got over & that woman started making excuses. She started to defy by saying she had a little work left & will be finalising the deal in a week or two but she didn't appear for 8 months. After 8 months she came & showed her inability to buy the machine & asked to consider to return the money. But I had invested the money in overhauling the machines & some in paying dues. So as per are mutual agreement I also showed my inability to return the amount. Now after 20 months (including the time of agreement period) that woman's lawyer has sent me a notice. The notice says that In a 'VERBAL' deal there was an agreement that the woman wants to start a shop but needs time for the same & if that woman isn't able to get licence & other permissions to open a shop in her house then the whole token money will be returned to her(But this claim is absolutely false). Notice also contradictorily claims that this whole deal was done by signing a document in presence of the witnesses & I didn't give a copy of the agreement to her; But this claim is also totally false. Now she wants the money back or will file a case against me. Please suggest what do you conclude from this whole thing & what should I do & what to write in response. Also suggest that is that hand written agreement a valid legal proof? Is a lawyer ethically entitled to check & ensure the facts before sending a notice to someone? K. Sathi