Dear Priyanka,
Without prejudice to the reasons, the employee is under orders of termination and serving the notice period of 15 days, at the end of which his termination would be effective. Therefore, the entire notice period falls within his service in the establishment without affecting his employment benefits, whether contractual or statutory. I think you will have no objection to the fact that leave is a statutory benefit of employment, though its sanction might be a matter of the employer's discretion based on work exigencies, if any.
Diwali as a Festival Holiday
Diwali, being a festival holiday, what would you achieve by insisting him to work on that day just because he is under the notice period? Besides, you have to pay him extra wages and another day of holiday in substitution as per sec.18 of the Maharashtra Shops and Establishments Act, 2017, if it is applicable to your establishment.
Therefore, exercise your discretion.