Venkat - Employers sometimes resort to trivial steps like this, and it is a sign of ineffective HR and workplace ethics. I presume that you haven't signed any new terms of the contract with your current employer.
Practical advice: Please email HR, looping in your Reporting Manager/HR Business Partner, citing the offer letter clauses that were originally agreed upon. State what you have agreed to, and clearly highlight at the end of the email that resignation is at the will of an employee. You have decided to pursue a more suitable opportunity outside of the organization, and you cannot agree to an extended probation period and notice period like this. Although the COVID-19 pandemic might have caused a few changes in HR modalities, notice periods and probation periods are not affected by such incidents, so you have to go by what was originally agreed upon with HR.
If you will, please avoid altercations, verbal spats, email thrashing, etc. This is the time to stay calm, cool, and mature. Be confident in presenting your perspective and have the utmost respect in your words while you put them in an email or over a phone call, maybe.
You will sail through—stay calm and initiate talks soon.