Land ownership

Stamp paper with proper stamping or promissory note is a valid document for transactions like agreements, loans, etc. The white paper is not legal tender and is invalid. you can return his 1 lakh as soon as possible and ignore this issue. You have all rights not to sell your property before registration, he can not force or use police influence to close the transaction in his favor. In the worst case, you can file a reverse complaint. Make sure you have receipt of the amount you returned to him. 

As it is civil in nature he has to file suit for specific performance.

Issue a notice to the buyer for return of blank signed paper.

The paper can be used as agreement to sell even if it is unstamped which can be affixed.

What document has been created by the purchaser can not be presumed, you will have to find out.

The present threat is "police complaint".  By issuing a legal notice to the proposed buyer asking him to return the original signed paper and get the refund of the deposit, you can create a record to avoid police intervention that this is a civil dispute.

If he asks interest and damage cost pay it  peacefully.