Update 8/8/2023:
It's almost a year now and my MS 365 Family Subscription is about to expire but still this issue is not fixed. I can only confirm that this only works on older versions of android like Android 8.0 and Android 10.0. I tested on these devices while being managed by Google Family Link and they worked as intended. This is broken on Android 11.0 and up. Maybe this is not the right platform to report bugs. I hope someone can point us to the right platform.
Update 10/25/2022:
I just found out that it does not matter if it's existing or new child MS Account. I just tested all 3 child accounts (mix of new and existing accounts) and all are working on an android device with version Android 8.0. Then tested all accounts on Android 11.0 and 12.0 devices, all of them got invalid license error. I hope this can further help in fixing the problem.
10/24/2022:
Hi Sumit, this is just an update on my side. Today, I created a new MS Account for my third child, and I can confirm that it is working fine now. But unfortunately, the existing account of my two other children still has this issue. Maybe, fix is working only for new accounts?