The licensee cannot unilaterally vacate within the lock-in period without consequences, even if he has financial problems.

His inability to repay debts is not a legal excuse under Indian contract law.

Mutual termination is recommended. You may allow early exit only by written settlement. You can adjust unpaid dues, deduct penalty from deposit and avoid prolonged disputes. 

If he refuses then you may have initiate legal action through court for the reliefs as per the terms of L & L agreement.

You adjust one month notice period against security deposit 

similarly since lock in period is of 12 months you can recover  3 months shortfall against security deposit 

Since this is a leave and license arrangement and not a tenancy, your rights and remedies are governed primarily by the written agreement and general principles of contract law.
On the facts you have stated, the licensee cannot legally vacate the premises within 10 days without consequences. The agreement contains a 12-month lock-in period and a one-month notice clause. It also specifically provides that if the licensee vacates during the lock-in period, he is liable to pay the license fee for the remaining lock-in period. Contractually, therefore, his proposed exit amounts to a clear breach of the agreement.
That said, the manner in which you respond should balance legal rights with practical realities.
As an immediate step, you should ask the licensee to communicate his intention to vacate in writing, preferably by email or WhatsApp. Oral statements are not sufficient. A written admission that he is vacating due to financial distress will later protect you if any dispute arises. Until matters are documented, you should not accept keys or possession.
Legally, lock-in clauses in leave and license agreements are enforceable, particularly in commercial arrangements such as shops. Courts generally uphold clauses requiring payment of license fees for the remaining lock-in period as liquidated damages. However, from a practical standpoint, if the licensee is already under heavy debt, recovery of the full lock-in amount through litigation may be difficult. Courts also tend to consider whether the licensor has mitigated losses by re-licensing the premises quickly.
With respect to the security deposit of ₹1,00,000 taken in cash, you should be cautious. The deposit can be adjusted only against clearly quantified dues. Prepare a written settlement statement showing the license fee payable up to the date of vacating, the one-month notice period rent, and any other agreed damages. Any forfeiture or adjustment of the deposit should be expressly recorded in writing. Even though the deposit was taken in cash, it is advisable that any final adjustment or refund is documented clearly and, if possible, routed through banking channels to avoid later allegations.
If you decide to permit an early exit, do not allow the licensee to vacate casually. You should insist on proper documentation. Ideally, execute a deed of early termination or surrender of license stating that the licensee is vacating voluntarily, that the exit is during the lock-in period, how the deposit is being adjusted, and that both parties waive future claims. At the very least, obtain a signed settlement letter confirming full and final settlement, peaceful handover of possession, and no further claims by either side.
You should also be aware of practical challenges. If you insist on full lock-in damages and the licensee lacks funds, you may face prolonged litigation with uncertain recovery. If he vacates abruptly without proper documentation, he may later allege illegal withholding of deposit or improper termination. Further, if you re-license the shop quickly, a court may reduce the damages claimed on the ground that your losses were mitigated.
A balanced and commercially sensible approach is often to insist on payment of the mandatory one-month notice rent, adjust any arrears, adjust or forfeit the deposit to an agreed extent, waive the remaining lock-in damages through a written settlement, and take back peaceful possession so that the shop can be re-licensed promptly. This minimizes litigation risk while protecting your immediate financial interests.
You should not forcibly dispossess the licensee, lock the premises, or retain the deposit without written settlement terms. You should also avoid relying on oral assurances. All understandings must be recorded before possession is handed back.
In essence, the licensee is in breach of the agreement, and you have a strong legal position. However, enforcing the lock-in clause must be weighed against the practical difficulty of recovery. A documented early termination with clear adjustment of the deposit is often the safest and most effective route to close the matter without future disputes.

Obtain letter from licensee that x amount of security deposit has been received in full and final settlement and no further money is due and payable by licensor 

that licensee has no objection for amount deducted by licensor towards failure to give one month notice etc

You can take possession and deduct lock-in Clause and other terms amount as per agreement 

You may get a deed for Mutual Termination & Full and Final Settlement Deed drafted and executed jointly by both.

This deed is the legal proof that the Leave & License Agreement has ended and that all money matters are settled.

You can add the following clause

“Both parties confirm that nothing remains due or payable and neither party shall have any claim against the other in future.

Include this line in the settlement deed:

 “The Licensee indemnifies the Licensor against any future claims, dues, liabilities, GST, statutory issues, or third-party claims arising from the Licensee’s use of the premises.”

You may take the assistance of an advocate in the local if need be.

Execute a Notarised Deed of Mutual Termination immediately: Licensee confirms vacating [date], full settlement of Rs.1L deposit (after deductions), waives lock-in/no claims, hands over keys/possession. Both sign (witnesses).​

Conduct joint inspection; refund balance via cheque (proof). Update police verification.​

Risks mitigated: Prevents future dues/tenancy claims under Maharashtra Rent Control Act. No notice needed for mutual consent.

Dear client, 

  In the instant case, it is important that you have the following documents which includes the Cancellation Deed of the Leave and License Agreement which should be signed by both the parties, a receipt that is signed by the licensor that states that dues are pending to be paid by the licensee. Further a Settlement Agreement should be drafted as well with regard to the security deposit. 

This Cancellation Deed that is mutually executed by both is an essential document that protects the is necessary to validate the vacation of the premises and protects the licensor from any foreseeable risk. 

With regard to the security deposit, it could be used to adjust the remaining balance.  

I hope this answer helps. For any further queries, please do not hesitate to contact us. Thank you.

Since the licensee wants to vacate on his own, the safest option is to terminate the Leave and License by mutual consent.

You should execute a written Deed of Surrender / Termination Agreement signed by both parties.

This document should clearly mention the vacating date, reason for early exit, and that termination is mutual.

Mention the lock-in clause and notice clause, and record how much amount is being adjusted from the deposit.

Since the deposit of ₹1,00,000 was taken in cash, clearly write how much is forfeited or adjusted and how much (if any) is returned.

Take vacant possession letter + keys handover acknowledgment on the same day.

Get a line stating that no dues, claims, or disputes remain from either side in future.

If possible, get the termination deed notarised for better safety.

Also collect a written confirmation that he is vacating voluntarily and not under pressure.

This process in Vasai Virar will protect you from future legal complications.