Kingfisher Airlines — Refund Issue

I booked two return air tickets through Southall Travels back in July 2011. I paid £ 900 for the booking flying from Heathrow to Delhi via Kingfisher Airlines. My wife and my son flew to Delhi in August 2011 and there return tickets was booked for 13th May 2012. Kingfisher Airline is not flying to London anymore.
I contacted Southall Travels on 11th April and I was told that our journey has started now and after that our booking should be handled by Airline directly. Travel agent has no role anymore after that. So I contacted Kingfisher through email and I was told by a lady in UK Sales Agency that I should be contacting Travel Agent because they are refunding the money to Travel Agent so I should go back to my travel agent. When I asked her about the refund amount, she had no clue about that.
So I contacted Southall Travels again and I was told by their staff on phone that they are making provisional booking for other ticketholders so I should not accept the refund and I should go back to airline and ask them for rearrange the tickets with someone else.
Contacted Airline again and I was told by Airline People that they have full right to cancel the flight two before the journey date and if they do so they will refund the money in full. When she said in full, I don’t know what that mean. But still I have to go through the Travel Agent.
Contacted Southall Travel and this week they have given me an amount of £ 304.70 as refund and they are not giving me any breakdown of this amount. On top of that they are saying that if I don’t agree with amount now I might lose the full money. I wouldn’t be able to claim that back. And this refund process might take months. Now cost of booking another ticket is around £ 700 and it’s a big difference. I am not saving for these billionaires and I have two kids then why should I pay for Mr Vijay Mallya’s family.
In what kind of world we are living in. A customer has to pay in every situation whether it’s his mistake or not. Businesses are always come out clean and neat. They get rescued by government and all politicians. Do these people know how a middle class family save for their holiday and kids?
It’s sad that I am living in world where I will be always working hard for rich and poor people. I might have to think twice when my son asked me for a toy which was for £ 200 but now I have to pay £ 400 to save a businessman. I wish I would have spent that money for my son.
Please suggest a way to come out of this situation.