See as the PSU Company is not allowing you to join their Company and you are not at the position to compensate them at Rs 3 Lakhs so it is better to give the 3 months notice period or rejoin!
On the other hand you have held that they are not allowing you to join the Company, is it due to any disciplinary action? have there is any communication to you on this? If this is a formal order then there should have been an order passed on this and you should have been provided with an opportunity of being heard. Apart there are many questions like what made them wait for 7 months period? Why they have not issue you any warning letter, was someone else recruited in your place to take up the operations further etc. Like that there are many things, the amount of Rs 3 Lakhs has to be substantiated with their loss or damages.
Aside relocating yourself was not your choice but the only option for them as they did not either terminate you nor accepting you. See there is error from both end but the major error has been made at your part! Please prepared to contest it and for any consequences if the PSU sue you.
Please seek an Advocate in this regard as face to face meet is very essential in your case and cannot be council from imedium.