Further alleging "collusion" between Jaitley and Mallya, the Congress president demanded resignation of the Finance Minister. Jaitley also issued a clarification over the matter in his Facebook post.
Rahul Gandhi called Mallya's claim "extremely serious allegations".
In a tweet, Delhi Chief Minister Arvind Kejriwal questioned that Prime Minister Narendra Modi met Nirav Modi before he left the country and the finance minister met Mallya, so what happened in those meeting? I do remember on one occasion he misused his privileges as member of Rajya Sabha and while I was walking out of Rajya Sabha to my room, he paced up towards me in Parliament building and suggested that he was going to make some offer of settlement.
Jaitley, however, said he never gave Mallya an appointment after becoming a minister in 2014, but the liquor baron misused his position as an MP to accost him once in Parliament.
"Mallya clarified that there was no formal meeting with Jaitley".
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".
Jaitley was quick to dismiss any official meeting with Mallya, but has confirmed this unofficial encounter at Parliament.
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 travelled on the airline and their travel was upgraded to business class for free.
"I did not even receive the papers he was holding in his hand", Jaitley said. "I hope the honourable judges will consider it favourably; everybody gets paid off and I guess that's the primary objective", said Mallya, who is fighting extradition to India on charges of fraud and money laundering amounting to around Rs 9,000 crores. This provided the opposition some fodder to target Jaitley and the Congress said that the revelations were an embarrassment to the government. Under UK rules related to extradition, the judge does not need to establish criminality of the person sought, but has to decide on the basis of evidence presented whether there is a prima facie case to answer in the requesting country.
India wants to extradite 62-year-old Indian businessman from Britain to face criminal action relating to loans taken out by his defunct Kingfisher Airlines and Indian authorities want to recover about $1.4 billion they say Kingfisher owes. "The banks had filed objections to my settlement letters", he had said.
He said there were CCTV cameras, and "we can all see that for proof".