Upadhyay, however, issued another notice to Dagar asking him what legal action he is taking in this connection.
Aam Aadmi Party chief Arvind Kejriwal on September 8 accused Dagar of offering a bribe of Rs 4 crore to one of its MLAs for switching sides against the backdrop of government formation moves in the capital.
Delhi BJP chief Upadhyay had slapped a show cause notice seeking his explanation in the wake of the allegations.
"Today, we received his clarification on AAP's sting. In his reply, Dagar has reiterated mostly things what he had already put before the media in his defence. Dagar in his explanation clarified that one and a half months ago, he (AAP MLA) met him and requested him to make him join BJP. He had also shown interest to contest elections on a BJP's ticket", Upadhyay told reporters here.
Upadhyay said, "In his reply, Dagar explained that the sting is totally fabricated. However, we have asked him what legal action, whether he is going to file an FIR or file defamation case, he is planning in the case. I have asked him that he has to prove his stand."
Asked whether he was satisfied with Dagar's clarification, Upadhyay said, "Yes, I was satisfied, but what I have told him that since incident took place at your home and nobody had authorised you (Dagar). He said that he has not done anything like that."
The Delhi BJP chief also said that the party has asked him to file his explanation within the next one week.
"We have asked him to prove his stand on these allegations so that the party's image is not compromised," he added.
On September 8, Aam Aadmi Party Chief Arvind Kejriwal had claimed at a press conference here that AAP MLA from Sangam Vihar, Dinesh Mohania, was offered Rs 4 crore by Delhi BJP Vice President Sher Singh Dagar to quit the party.
Dagar had totally denied the allegations and claimed that he was being framed. "If any charge is proved against me, I would quit politics in which I had been there for the last 44 years," Dagar had told reporters at his residence.