Summary and solution of the ordeal
After obtaining the Police Report it was too late so went back and booked the same hotel. Rushed to the Barcelona consulate for some ID letters, instead they suggested me to try my luck with the airlines which didn't happen.
No airlines allowed me to fly based on the Police Report and the document printouts I had.
Took the afternoon train to Madrid and booked AirBnB near Usera in Madrid. Went to Indian Embassy the next day and after a lot of hassle(since I had no CASH(15-Euros) to pay for the Emergency certificates, for which the Embassy DEMANDED that I give them the same in a written affidavit) got my Emergency Certificates(WHITE PASSPORT valid for a month).
Paid $180 extra and rescheduled my Stockholm Emirates tickets from Madrid (to Bengaluru via Dubai) and flew back to India. Also I was advised to take either direct flights or flights via GULF countries and strictly AVOID via LONDON.
Some friends even suggested train route from Madrid to Stockholm(almost 25+ hrs with ID checks at borders). Multiple trains, random ID checks and almost 500 euros trip was not consoling for me :)
Also initially when asked for an ID to travel back to Sweden, the Indian Embassy said their ID letter to an India lady with a similar case(passport stolen in Barcelona), who wanted to fly to Sweden didn't work. Airlines didn't allow her to fly back to Sweden. This was a day before I went to the Embassy. I am not sure if there are any lucky devils who pulled it off. Document checks are very strict for Indians.
NOTE TO INDIANS:
As an Indian we expect people of Indian Embassy to be KIND towards us. But please DON'T make that MISTAKE. They are ruthless in their execution. They will make you realize that you have committed THE BIGGEST CRIME BY LOSING YOUR PASSPORT. I was wandering for 15 euros and a couple of euros for that automated photo-vending machine. ATMs are rare and I was not even sure if my card would work for cash withdrawal. I offered to pay an Indian staff personnel via PayPal in exchange for some cash, but in vain. Finally got help from some restaurant, swiped card for coffee and some cash. Spaniards were helpful and that wiped off all my grudge :0)