Having issues with my Apple watch band(its not getting lock in its place), spoke to apple customer care and got to know, they don't have policy to replace sports band, so am i suppoed to keep the defected piece?

If your problem Sports Band was not covered by warranty you would simply buy a new band, so yes the old one remains your property.

However, I would try removing the band from the watch and give the locking mechanism at the end of the band a good rinse with warm water in case the buttons have simply become clogged. Then make sure you have fitted the band correctly, because it is easy to get the part with holes upside down and it will fail to lock.