Hey OP.. quite unfortunate to hear your case. After dealing with a lots of Indian 'SEO' expert companies that send emails with 'western' female names, i've pretty much stopped outsourcing my SEO stuff. Sticking to just BHW.
I don't think its worth your time to create .net/.org domains of these idiots. Since Paypal has refused to work in your favor, I suggest you do a bit more research and find out their phone number or if its difficult to find, start off as a fresh customer (preferably using a proxy so you hide your IP footprint as well) and tell them you have a big budget project, they'll fall for it.
Speak to them politely in terms of refunding your money back or tell them you will take legal action both in their US office as well as the city they are based in in India.
Also suggest you speak to Paypal again, explaining the situation that they (Paypal) are indirectly/associated in helping these idiots to scam others as well, Paypal wouldn't want to get involved in legal lawsuits, especially in India where its already difficult for them to operate.
If the company is legally registered in India, then they must be registered under STPI or some kind of company registrar, you could drop them an email as well.
Bottom line is, do your research and threaten these guys with the valid options you have, they will give in, eventually.
And an expensive lesson learnt. Hope you would repeat this mistake again!