It's an accumulator for the (optional) ASR system. You need to replace the leaking accumulator, replace the brake lines you cut, and then pressure bleed the entire system including the SP port on the ASR pump to get all four brake calipers functioning properly again. Hopefully nothing else was messed up when attempting to drive without the accumulator in place.
See FSM job 42-0800, section F, for an explanation of the accumulator function:
http://www.w124-zone.com/downloads/MB%20CD/W124/w124CD2/Program/Chassis/42-0800.pdf#page=28
Brake bleeding procedure is maintenance job 4280, section B, and MUST be done via pressure bleed (cannot pump the brake pedal):
http://www.w124-zone.com/downloads/MB%20CD/W124/w124CD1/Program/Maintenance/94_95/4280.pdf
