Its a lot better to part ways like this.
Forget the engagement.
Marriage is no joke.
It takes a lot of courage to say NO. It is good that the boy in question has realised that this is not for him and its better that way.
Forcing him in any way would be detrimental to lives of both families. Forget legal course, it will only complicate things further.
Even if you try to speak with the help of a lawyer, and they agree later due to pressure legally, would it be a good beginning to start married life? NO.
Though I do not expect you to understand my reply, in cases like these, the ego will be high, there will be self-esteem involved, loss of reputation, no doubt there is loss of dignity in society etc, but look at the larger picture. Once the thought of not getting married has entered the mind of the boy, there is no use getting em married by hook or crook, it will worsen matters to great lengths. Forget getting compensation from them, how much humiliation you have undergone, they too would have.
Just let it go. Find someone else who is mentally compatible with your sister and get her married, for marriage is all about mental compatibility !.
I would like to add the following.
Even if expenditure has already been done, it can be asked directly to boy's side, failing which legal measures can be thought of. At all times approach in cool manner, shouting, raising voice, gaali galoch will only invite more trouble to already troubled minds.