[@Saiteja Inabathina ]Since you've created two SQL managed instances with the same IP address and need to peer two VNets that share this IP address, the process involves addressing the IP conflict first. You'll need to reconfigure the IP addresses to be unique within each VNet. Once done, you can proceed to peer the VNets and create a failover group for both SQL managed instances, ensuring smooth functionality without IP conflicts.
Source: Stackoverflow