Fake employee went to labor inspector and said we hadn't paid him enough

Dear all , I run an HR company . Few months back I took help of a person who promised me to provide man power. I gave no employment related paper as I needed his help for one month due to heavy work load. He never visited office however he visited few sites . I paid him Rs 15000 in advance by cheque then Rs.8500 more later by cheque and told him we didn't need his services because he was not responding on phone and was not visiting office. I lost few contracts due to him .
Later , he went to labor inspector and said we hadn't paid him enough. And that he was an employee of ours. He is demanding more .
Tell me what to do for now and advice me something for future to handle these things.

payment by cheque must have an offer from his side, for providing manpower
that is evidence
labour inspector wil ask for form XXIV from him as evidence of providing manpower to your establishment
and the principal employer has to issue form V
without these documents no case will stand