You have posted that:
--"My friend problem is , he has not got the Confirmation Letter in writing but he is being told to resign with 0 notice verbally ." If he is forced to resign then it can be termed as deemed termination. Employee can approach appropriate forum which may be under SE act, O/o labor Commissioner, Civil Court.
Employee can withdraw resignation. Company may terminate on withdrawal.
The attempt of the company seems to be to extract resignation and then claim 3 month's notice pay and square off the dues. Your friend is closest to the situation and he can comment better on the intentions of the company.
--"He need 3 months to search a new job.”
Employee can negotiate with the line management/HR/good offices of the employer and company may agree to grant time. In some instances it is seen company also do not want to be entangled in litigation and advice the employee to tender post dated notice, sit at home and resign once he is able to firm up his next venture.
Company may or may not agree to issue written instructions and to pay salary. All depends what is the resolve and mettle in the employee.
--"How he can handle the situation if he is issued a letter of non performance and terminate him on the ground?”
The data can not be fudged. Employee may collect and save all records and raise the performance. Next employer would like to take a performer.
If there is universal and uniform decline in sales/performance it shall be difficult to single out an employee.
--Employee may record (audio/visual) if the company claims notice period is 3 months, or extract even if an email that notice period is 3 months. Then employee may tender notice period of 3 months, and mention last day in office/effective date of resignation.
If the industry is unionized, union may rescue the employee.