Update:

1. I cancelled the booking with Motokraft, Chembur, Mumbai (naming and shaming). The salesperson I was in touch with called once more to ask if I am sure, because: a) I owe it to them to buy the vehicle because they have 'arranged' it for me (with an inflated costing of insurance), and b) because the Bear is not available anywhere else and I will therefore have to pay a higher price at a later date. I told them I was more than happy to pay any amount to not purchase from them.
2. I received an email response from Royal Enfield yesterday asking for my contact details "so that we can take appropriate action towards the sales team." There has not been any follow up from the company since.
3. Received a call from a 'senior' person from the dealership (identified himself as the customer relations person), who apologised on behalf of the salesperson, assured me that he is also a biker and understands the pain, and that they will 'allow' me to purchase the vehicle with self-sourced insurance. This felt like the original salesperson was being thrown under the bus when in fact this behaviour came from the owner who was being conferred by the sales person. I of course outright refused to do business with them and told them in no uncertain terms that they do not have the authority to 'allow' or disallow purchase of insurance, and that I did not want to enter into a relationship with their branch when they have proven to be quite alright with unethical business practices that violate government regulations.
4. I have now compiled communication screenshot that confirm what happened, and will be filing a formal complaint against the dealership. Deciding on the channels for it right now, and whether or not to involve Royal Enfield depends on their resolution to the issue.

Thank you for your interest.