Default on monthly bill of mobile phone service provider

Sir

In 2001,I applied for a mobile connec.(post paid.I submitted a security of Rs 3000 for the connection.After approx. one year of poor services I decided to discontinue it and did not pay the bil in that month.They contacted me over the phone and reminded me that I haven’t paid my bill, I told them I do not wish to continue the service and they might as well disconnect it.They told that I would have to settle the bills for that.I told them that they already have a security lying with them and could deduct the amount from that.Till that point of time the bill had not exceeded the security amount. But even after my informing them about my wish to discontinue their services they did not cut the connection and the bill crossed the security limit. After some time they disconnected and asked for the amount of approx. 4000 Rs. that I declined to pay.

Now they have sent me a notice (which does not look like a legal notice) via a legal agency asking me to pay the amount within 3 weeks or face legal action.

I want to ask for your advice regarding:

What legal actions they might undertake.

What legal options do I have?

What should be my response to their most likely legal action?

Thanks