Can I take legal action against my credit card company for failing to resolve a dispute and trying to collect the amount disputed?

You can sue, but I don't see how you can win.  A credit card company is not a court.  It has no power or right to adjudicate whether you or the merchant is legally right.  Assuming that you have the standard contract with the credit card company, it appears to have followed that contract if it let the merchant know that you were challenging the charge.  If the merchant insists that you owe the money, the credit card company will pay it, just as I'm sure your credit card agreement provides.  Your recourse, as the credit card company informed you, is to sue the merchant.  Meanwhile, the credit card company has actually paid the merchant, but you have refused to repay the credit card company, so of course that failure to pay has appeared on your credit  history, and of course the credit card company is trying to get you to repay it.