I have had a Response from microsoft with the following details.. So far it brings more questions than anything but posting it just in case others find this post.
Good day, hope you are doing well.
After discussing internally, I would like to recommend using the relay email method- How to set up a multifunction device or application to send email using Microsoft 365 or Office 365 | Microsoft Learn https://learn.microsoft.com/en-us/exchange/mail-flow-best-practices/how-to-set-up-a-multifunction-device-or-application-to-send-email-using-microsoft-365-or-office-365
You can also refer the below table referred from the above articles on feature based capabilities
Here's a comparison of each configuration option and the features they support.
Features SMTP client submission Direct send SMTP relay
Send to recipients in your domain(s) Yes Yes Yes
Relay to internet via Microsoft 365 or Office 365 Yes No. Direct delivery only. Yes
Bypasses antispam Yes, if the mail is destined for one of your Microsoft 365 or Office 365 mailboxes. No. Suspicious emails might be filtered. We recommend a custom Sender Policy Framework (SPF) record. No. Suspicious emails might be filtered. We recommend a custom SPF record.
Supports mail sent from applications hosted by a third party Yes Yes. We recommend updating your SPF record to allow the third party to send as your domain. No
Saves to Sent Items folder Yes No No
Requirements
Open network port Port 587 or port 25 Port 25 Port 25
Device or application server must support TLS Required Optional Optional
Requires authentication Microsoft 365 or Office 365 username and password required None One or more static IP addresses. Your printer or the server running your LOB app must have a static IP address to use for authentication with Microsoft 365 or Office 365.
Kindly let me know if you need any further clarification, I will be glad to help.
I have actually forwarded this onto the dev team as it's their application, i figure they could use this better than i could but I'm still wrapping my brain around it.