Storing IR Sensor value not working
Thanks to the help from @Majenko♦ I was able to fix the issue.
1 - int sensorStatus; should have been set to static int sensorStatus = HIGH; to make the program remember the value of the sensor.
2 - sensorStatus = HIGH; should have been right after digitalWrite(relayControl1_1, HIGH); in the buttonStatus conditional else part to make the program set the sensorStatus back to HIGH correctly.
3 - Unrelated to the question posted, doing the above steps made the program run the motors continuously unless they were stopped by an obstacle from the IR sensor. This was fixed by adding delay(2000); digitalWrite(relayControl1_1, LOW); after the sensorStatus = HIGH; mentioned in the 2nd step.
Source Code after fixing:
const int relayControl1_2 = 12; // relay 1 of 2 (input 2)
const int relayControl2_1 = 11; // relay 2 of 1 (input 3)
const int relayControl2_2 = 10; // relay 2 of 2 (input 4)

const int inButton1 = 9; //input button 1
const int inButton2 = 8; //input button 2

int buttonStatus1 = 0;
int buttonStatus2 = 0;

const int inSensor = 7;

void setup() {
  Serial.begin(9600);
  pinMode(relayControl1_1, OUTPUT);
  pinMode(relayControl1_2, OUTPUT);
  pinMode(relayControl2_1, OUTPUT);
  pinMode(relayControl2_2, OUTPUT);

  pinMode(inButton1, INPUT_PULLUP);
  pinMode(inButton2, INPUT_PULLUP);

  pinMode(inSensor, INPUT_PULLUP);

}

void loop() {

  static int sensorStatus = HIGH;

  if (digitalRead(inSensor) == LOW) {
    sensorStatus = LOW;
  }

  if(sensorStatus == LOW) {
      buttonStatus1 = digitalRead(inButton1);
  
      if(buttonStatus1 == HIGH) {
        digitalWrite(relayControl1_1, LOW);
      } else {
        digitalWrite(relayControl1_1, HIGH);
        sensorStatus = HIGH;
        delay(2000);
        digitalWrite(relayControl1_1, LOW);
      }
    
      buttonStatus2 = digitalRead(inButton2);
    
      if(buttonStatus2 == HIGH) {
        digitalWrite(relayControl2_1, LOW);
      } else {
        digitalWrite(relayControl2_1, HIGH);
        sensorStatus = HIGH;
        delay(2000);
        digitalWrite(relayControl2_1, LOW);
      }
   }
}