I have a doubt whether any inadvertent mistake had crept in the drafting of the post. If the notice on resignation is a maximum period of three months and the buy-out to facilitate immediate or early exit is three months pay( may be either gross or basic only as stipulated in the contract of employment ), the formula can be Current Monthly Gross/Basic pay X 3 only. In the case of part compliance of 1 month's actual service, it can only be Current Monthly Gross/Basic pay X 2 only. How can it be 3.5 X Basic X 2? What does the " 3.5 " actually denote?
Similarly, any prospective resignation on its acceptance would take effect only from the actual date of relief. As such the employer is bound to pay for the actual period worked up to and inclusive of the date of relief. If the relieving date falls in the middle of the month, of course, the employer may hold it till the regular date of disbursement of salary.
If the version of your description is correct contrary to my doubt, then the stand of the management is totally wrong as well as illegal. Try to politely explain the position to convince the management and get your legal dues as well as experience certificate. If it is not possible,inform the new employer about the problem and join the new Company with the available credentials of your previous service. Later you can recover your dues by appropriate legal means.