This is more than indiscipline; it is plain forgery. I recommend conducting a domestic enquiry and terminating the employee. However, do not terminate the employee without conducting the domestic enquiry.
Questions to Consider
Why was the letter issued? What was the purpose? Has the employee already left the job? Ask the employee to submit the original letter to your office. If he does not do so, you may file a police complaint.
Thanks,
Dinesh V Divekar