"It's a clear case of defamation because contractually what he (Bhagat) was bound, he was given. Now why is he slandering us? We are consulting our lawyers. But that's a call Mr. Vinod Chopra has to take. He is the producer of the film," Hirani told.
"I am sure it's defamation because lots of people I know are wondering (due to Bhagat's allegation)? in lots of Tweeter and Facebook sites we have been abused saying, 'we won't watch Hirani's film or Abhijat's film'. This kind of muck is flying all over the place. I think Vinod Chopra is looking into it, I guess he will follow the legal path," he added.
Hirani clarified that once Bhagat had given the rights to make a film on his book, there shouldn't be any "percentage issue".
Hirani maintained that the basic plot of the film is completely different from the book.
"In the book, there is no bet between the two friends, the journey to find their friend is not there, the child delivery scene, the 'Balatkar' scene, the two weddings where they crashed? these key scenes are not in the book. There are certain similarities, which I am not denying, but we had bought the rights for that.
"We can use 100 percent of it. What does he (Bhagat) mean by 70 percent? Are we supposed to pay more money for using 70 percent? Are we supposed to give different credit for 70 percent? I do not understand this percentage controversy," said Hirani.
Baghat has reportedly posted a blog saying he should have got a prominent place in the rolling credits. He also said that he was not shown the final script.
Reacting to his allegations, Hirani said: "We have officially bought the rights for the film. We drew a contract with him and it clearly mentions about the position of his credit. With open eyes he had seen the contract, consulted his lawyer and signed the agreement.
"In the contract, we have said that the title would be given in the rolling credits. We haven't changed the font size. We haven't increased the speed of the title. It's exactly there where it was agreed to be," said Hirani.
The director, who has a hattrick of hits - Aamir Khan starrer "3 Idiots", "Munnabhai M.B.B.S." and "Lage Raho Munna Bhai", says after signing the contract with Bhagat, they were not obliged to show the script to the author.
"I was not obligated to narrate the script to him. I have bought the script from him and I am supposed to use it the way I want to use it. I had changed the script drastically, so out of good gesture I wanted him to know it has changed so much and if he feels he doesn't want to be associated with the film, he can tell me.
"He heard the script for four hours and readily agreed to stay associated, saying 'I want to stay associated with the film, it's a fine script' which he has said in your (IANS) interview too. He signed a Non-Disclosure Agreement. Now he writes in his blog 'I wanted to see the final script and it was not shown to me'. It is a blatant lie, he is telling," Hirani added.
Asked if Bhagat could have a vested interest in kicking up the controversy, he said: "I guess there is a motivation to create the controversy so that people read the book and see the film."
Hirani says that they never relied on controversies to publicise their creative work.
"Our film is doing exceedingly well. It's beyond my dignity to create a controversy for a film. We have never sold our soul for our cinema. I'm not stooping to that level to sell my cinema or make extra money.
"When you talk of that percentage thing, it creates a curiosity to read that book and judge the film."
Would he again adapt Bhagat's book?
"This came as a shock to me that suddenly he is trying to hog the limelight; suddenly he is trying to take away the credit from the screenwriters who slogged for three years to modify the script. He doesn't understand the difference between book writing and writing for a film. If he continues doing these things, I would rather not associate with him."
Currently Hirani is working on two scripts with Abhijat Joshi. One among them is "Munna Bhai Chale America", while the other one is a completely different plot. He will start shooting either of them by the end of 2010.