It is necessary to peruse agreement entered into with buyer to advice 

is her any forfeiture clause in agreement ? Kindly clarify 

if not you are bound to return the advance amount 

you don’t have to pay 5 lakhs but only return advance money received by you 

Since your brother entered into a sale agreement with him as your power agent, your brother can be held liable though you too can be held for it.

Instead of stretching it too far, better settle the matter amicably by returning him the advance amount, because even if he goes to court or you go to court, the court will pass orders to return the advance amount with interest from the date of receipt of the said amount.

The ball is in your court to decide about settling the matter amicably or to stretch it legally and undergo more stress and litigation pressure. 

1. Was there any forfeiture clause in your Agreement for Sale incurred with your said prospective Buyer?

2.  If there was no clause mentioned in your Agreement for Sale regarding forfeiture  of the advance amount paid by your Buyer, then you shall have to return the said amount in case of cancellation of the Agreement.

3. However, it is a civil dispute and Police can not interfere in to this matter.

Refuse to oat 5 lakhs but return only 2 lakhs received as advance 

If the sale agreement was executed by an unregistered deed, you can issue a notice informing him that the sale agreement stands cancelled upon he not honoring the conditions of the sale agreement and did not turn up as per the agreement conditions and inform him that he may collect the advance amount with interest on any working day or toi let you know his bank account details to enable you to transfer the same directly 

The police cannot interfere in this matter because it is a civil matter.

You can file a suit for specific performance if there is an agreement between you both 

Dear Client,

Breach of Contract by Buyer:

• The buyer clearly breached the "Agreement to Sell" by not completing the registration within the agreed-upon timeframe (agreement period + 2 months grace).
  Section 37 of Indian Contract Act, 1873: Obligation of parties to contracts.
  Section 39 of Indian Contract Act, 1873: Effect of refusal of party to perform promise wholly.
• Time is generally considered the essence of a contract in real estate transactions unless explicitly stated otherwise. His failure to arrange funds and complete the sale constitutes a default on his part.

Forfeiture of Advance (Earnest Money vs. Advance):

• This is the tricky part because your agreement had "no clause about advance if agreement breeched by buyer."
• Earnest Money: If the Rs. 2 lakhs was designated as "earnest money," it is generally understood to be a guarantee for the performance of the contract and can be forfeited by the seller upon the buyer's default, even without an explicit forfeiture clause, provided the amount is reasonable (typically 5-10% of the total consideration, but courts might allow more or less depending on actual loss).
• Advance Money: If it was simply an "advance" or "part payment" without being specifically termed "earnest money" or having a forfeiture clause, then the legal position becomes more nuanced. In such cases, the seller might have to refund the advance, but can claim damages/losses incurred due to the buyer's default.
• Supreme Court Rulings: Recent Supreme Court judgments have emphasized that for forfeiture of "advance money" to be justified, the terms of the contract should be clear and explicit in that regard. However, even if it's considered just an "advance," you are entitled to claim and prove your actual losses.

Police Involvement:

• Purely Civil Matter: This is fundamentally a civil dispute concerning a breach of contract. The police generally have no role in such matters unless there is a clear element of criminal fraud (e.g., you intended to cheat him from the beginning, which is clearly not the case as you got the agreement done and waited).
• Pressure Tactic: The buyer going to the police and showing up at your brother's home with people is a tactic of intimidation and harassment. The police asking you to return the advance is likely them trying to mediate or avoid a "complaint" rather than a legal directive. They cannot force you to return money in a civil dispute.

I hope this answer helps. In case of future queries, please feel free to contact us. Thank you.

Dear Sir/Madam,

You are suggested to approach higher officials of the police and file the complaint against that person and the said police officials who are supporting him. Also, file the suit for recovery of damages, mental agony and harassment caused by his failed commitment of sale agreement. Also, file defamation suit against him. These all, will create pressure and he will move without disturbing you in future.