I have read your post and studied series of problems faced by you.
1.Firstly, I presume your current reporting manager,HOD and Ex Reporting Manager in the same company are the people who might be deliberately harassing you.The CEO or M.D of the company might be neutral judge in the case.What I mean to say is that you can refer this harassment to him and request issue of release of reliving letter.
3. Secondly,bring this to the notice of your current employer/HR and submit all relevant evidence.
4.Thirdly,As far as Reference Check is concerned,since you are in service industry you can provide references of your external customers like clients,project partners,vendors,junior colleagues and co workers (after taking them into confidence).
In case if your MD or CEO is a professional person or supports your stand you can even request him to provide your Reference which can be highly valid in this case.
2. Fourthly,if you do not get any support from the Top Management, you can file a complaint with the Office of Labour Commissioner.
Also note that you have sufficient evidence to prove your employment with them.So do not worry if the relieving letter is not issued. However highlight this harassment to your new employer.You can anonymously provide highlight your plight and harassment on GLASSDOOR which is a professional website.
For any further support please contact me.
I really appreciate your kind advice.
I haven't spoke with the CEO as well as the co founder regarding this issue because of fear. But as per your advice i will definitely bring in notice to them. Also, i am about to post my experience to the Glassdoor.