"When I informed the situation to my firm, my firm said I will get all the money I contributed towards Arbeitlose insurance."
if you have patience, will not make serious mistakes and are ready for a several-years-lang disputes in courts of laws that will take place in Germany, you will get those money + the money you had to pay for your cases.
"What are my options :
1) Take the firm to court?
2) Fight with AA for money since I have contributed 4 and half years."
in order to estimate your options, please answer me one question: when your work contract was cancelled, that is when you received a corresponding letter from your employer?
in any case - if you want to stay in Germany and/or get any money from Arbeitsamt: locate your local Arbeitsgericht at once and be there on Monday in 9.00-10.00. every Arbeitsgericht has registrars that help you to make a corresponding initial claim vs. your employer, explain them your case so that they make that claim for you. Most surely that you will have to get a lawyer later, but now you just need to get a case running without loosing any time
Vorsicht: if your company employs less than 10 people, tell the registrar in Arbeitsgericht that you do not know the actual number of employees but most surely their number exceeds 20 people.
P.S. if you answer my question till tommorow evening, you will have my answer about your options till monday morning ... probably i will ask additional questions as well, your case is not easy
"There maybe a possibility they rejected for AL-Geld because you will be still getting ur salary till end of the year from your company."
Nope most surely it happened because of his residence permit. it becomes invalid when he loses his job -> he will not be available on the labour market -> he gets nothing from Arbeitsamt
but: if he has a claim vs. his employer running, he loses his job only when court of law reaches a decision about his claim ...
"i.e, not as freelancer which is not alllowed for foreigners anyway"
Not right. i work as one from February, officials know that and i did not become any problems ;)
that of course does not mean that every foreigner is allowed to work as a freelancer, everything depends on you and on what is written in your resisdence permit
"Please do not forget to register with no more than 1 week later."
??? he has to make a corresponding application next day after receiving cancellation of his contract. it seems that Arbeitsamt refused to process his application - as i said, his case is very interesting ;)
"I am more tilted towards receiving back my contributation of arbeitlos insurance and walk out of Germany"
if you walk out of Germany willingly NOW, you will get no money from Arbeitsamt
"I can expect decent justice here."
:o
It seems you did not integrate in German community in 4,5 years ... You can expect decent justice here ONLY if you can defend yourself! ;)
"BTW, Does any one know good laywer in frankfurt region who deal with foriegner issues ?"
Such a lawyer will not be sufficient in your case. You need a lawyer that knows lots of things, not only foreigner issues ;)
"They will extend your visa to search for a job"
it will be even more interesting if they refuse to do so. and if he does not submit a claim vs. his employer in time, the possibility of such an outcome must be taken in a consideration ...