“But they asked why should I give that letter.”
You should have asked Why he should not give that letter, show me any law that says you can not give such letter, you should have noted his name and should have gone to higher authority,( but who has the time) I have seen that once they know it is for America they want Chai Pani, better is to tell them it is needed for job in India. In Punjab, Gujarat and north India they know what is the use of the letter and ask for bribe. This kind of situation is better handled by a person who regularly visits courts, municipality, they know how to handle the situation.
In Bombay it seems more difficult but if you have contacts you can get Non Availability certificate in 1 day from your Municipal ward officer.
One of my friends recently got Non Availability certificate from Punjab side he paid 1000 rupees and in 1 hour the certificate was in his hands