The CM's political secretary Pawan Khera issued the notice through an advocate to Kejriwal and warned of legal action if the activist does not immediately apologise for his "derogatory remarks".
In a talk show that was recently aired on three TV channels, Kejriwal referred to Sheila Dikshit as a "dalal". The legal notice stressed that the activist must "immediately withdraw all the allegations and aspersions made by you against Sheila Dikshit."
Kejirwal has also been asked to "tender an unconditional public apology... to his satisfaction through print and electronic media with regard to the said baseless allegations and aspersions and using foul and filthy language."
The notice adds that if Kejriwal fails to comply with it, he will render himselves "liable to face appropriate civil as well as criminal proceedings under the relevant provisions of law."
However, the activist reacted to the notice with another jibe at the CM. In a public riposte to Sheila Dikshit, Kejriwal asserted: "Yes we are defaming you... and will continue to do so till the time you continue with corruption."
The CM's actions are giving her a bad name and his words cannot be blamed for that, he said. Of late, he has been leading the IAC's campaign against inflated electricity bills in New Delhi.
Kejriwal has alleged that the Delhi government is colluding with power companies and harassing the people.