In your case I would re-run the Management Server Configuration Wizard and enter the new password.
1. if databse is down , why entire clients are showing as offiline in SEPM?
SEPM needs a running database. If database is down, SEPM stops as well. Therefore, clients are going offline.
2. Why if AD account is locked , then entire clients are showing as offiline?
Almost same reason. If the account for SQL Server is locked, SEPM isn't able to access the database ... see above.
3. what type of communication happening between SEPM and SQL ? and which account(SQL Account or AD account) is communicating between these two?
Almost all informations (including antivirus content, client packages, policies etc.) are stored in the database. So there is a constant flow of informations between SEPM and database. The communicating account can be determined during SEPM installation.
4. IF database is down, in that time is there any communication between client adn SEPM server?
See 1.
5. Where the clients information and Daily DEF's Updates information,SEP policies, Virus Contents are stored? in SEPM folder or SQL database?
See 3. Some information such as antivirus content is stored both in the database and in the file system.