Hi Nisha,
Interestingly, there are two ways to look at it.
On one hand, the employee may be trying to find an escape route to procrastinate his work/assignments, for which he is accountable. Since he knows that the organization may take some time to resolve this issue, he has that much time at his disposal to get back and concentrate on his work.
Hence, he should be told, in the first place, that an employee who comes to the office to work, who has his priorities set, knows what he has to concentrate on - the dress or his work. If he knows what interests him more, no one can divert him.
Secondly, the lady who is now so much brought to the notice of the management should be observed for a day or two to see how much truth lies in what this employee has to say. Then, very slyly but firmly, she should be informed that she should try to avoid wearing such provoking dresses. No female would continue wearing such outfits once they realize. Every employee is important - be it male or female. The respect of both employees should be maintained but still made them realize where they are wrong.
There could always be a possibility that the male employee has a silent rivalry with the lady and is trying to bring her to notice and pull her down.
Hence, whatever the case may be, action should be immediately taken and not given too much significance. Otherwise, the employees would come back cribbing about similar cases. Also, if nothing is done soon, the organization may be termed as helpless to deal with such small issues.
Wishing you all the best.
Let us know how you resolved it!
Regards
Nisha