What is my legal obligation in this situation, after I sold a car and bought another with its price, then the buyer discovered difficulties in renewing the car's papers, while I was previously unaware of that, and he rejected my offer to return part of the amount and pay the rest in installments?

If the failure to renew the car's papers is a defect that diminishes its value or defeats its purpose, then the buyer has the right to return the car and reclaim the price, or keep it and take the value of the defect (arsh al-ayb). This is if the defect cannot be removed quickly without harm to the buyer. And if the defect entitles the buyer to annul the sale or receive compensation for the defect, then the seller must respond to his request.