Sources in the cricket board here confirmed that the ECB, in its letter to the PCB, not only demanded an unconditional apology from the PCB for Butt's remarks against English players but also wanted compensation.
Relations between the the boards soured after Butt accused the English players of spot-fixing after the third one-dayer of the NatWest series at Lord's.
Retaliating to Butt's comments, the ECB in its letter said that either he must render an unconditional apology or face legal action.
Sources also said that the ECB wants to be financially compensated for Butt's comments, which it claimed has damaged the image and reputation of the English players.
"The letter states that the PCB must compensate the ECB for loss of image and revenues because of Butt's remarks during the one-day series," a source said.
Butt, however, is in no mood to apologise or pay any compensation to the ECB and is learnt to have told his legal team to respond accordingly.
"The PCB legal team believes that the ECB has no case since Butt never made any direct accusations and they are responding to the ECB letter accordingly," the source added.
The source also confirmed that Butt has told his legal counsel to file a legal case against English batsman Jonathan Trott for calling Pakistani pacer Wahab Riaz a fixer before the fourth one-dayer at Lord's.
"Everyone should listen carefully to what the chairman said in his interview. He never directly accused anyone of match fixing, so there is no question of an apology," Nadeem Sarwar, PCB's media manager, was quoted as saying in the 'Jung'.
The source also said that the PCB was confident that its three players -- skipper Salman Butt and pacers Mohammad Amir and Mohammad Asif -- suspended by the ICC for alleged involvement in spot fixing, would be cleared by Scotland Yard.
"The legal team has told Butt that there are strong indications that the Scotland Yard does not have enough evidence to charge the suspended trio," the source said.