I don't think there's anything to worry about here as long as your disease isn't contagious (in which case, your management has a valid argument against keeping you on work and you may want to explore their health insurance policy but I'm assuming this is not the case). Your management hasn't shown any sign of firing you because they can't legally fire you but this could change very soon and some hard facts about your present situation are as follows:
You are in a pickle! As far as, I can see the situation can't get any worse than it already is. Your manager seems hell-bent on getting rid of you and unfortunately for you, you're replaceable that means they can hire someone with similar skill-set and they would have no issues continuing without you (or at least the management seem to think so).
I have seen many situations like these especially with small companies like yours. Sadly, this lack of empathy is the sad reality of today's corporate India. Don't worry though this kind of companies (or management) don't last long because such companies (or leaders) fail to build trust among team members and as soon as the sailing gets tough they're all left alone. With that, enough about them. Let's focus on you and what you can do in your current situation.
I see two main issues here: a) Work Culture b) Work Quality
I would suggest you walk up to your team-lead, manager, etc whoever accused you of above and tell them that you would like to earn their trust back and prove yourself to them once again to make this work but for that, you would like to know what specifically went wrong and hence you would like to ask a few questions to them:
- Ask them for the specific instances where you have 'compromised' work culture. Get them to give you as many details as possible, make follow up questions to get them talking if required.
- Same thing with poor quality of work or instances where you missed deadlines but do this only if you're 100% confident of your work and if you haven't missed any deadlines.
But while you discuss the above point(s) remember, you're there only to listen to them and get their side of the story, don't get into a discussion or argument over whatever they say, just patiently listen to what's being said and if they try to lead you into some kind of argument or expect any kind of response/explanation from you, just follow up with questions like 'asking them to elaborate/explain' or 'just tell them that you would need some time to dig through your memory or notes for that but in the meantime, is there anything else they would like to add to this'. Remember if you get into an argument, you lose.
Be sure to follow up with an email describing the above discussion with your team lead, manager, HR, etc in CC. Maintain a positive tone throughout your email, showing them that you're taking all of this positively and don't forget to subtly mention that while you disagree with some/all of these accusations, you will work hard to earn their trust back and improve in the lacking areas.
Add as many details as possible to the email without taking a negative tone and being extra careful with your words, you don't want to give them any chance to use your email as an admission of guilt to any of the charges. From now on awards, don't mention your sickness as an excuse for anything, try to avoid using the above disease as a reason for leave.
But you're probably thinking how will this help you? Well like I said your situation just can't get any worse, the only best option for you is to somehow get out of your situation with as little damage as you can. With all the above, we're buying time by delaying the inevitable because your management is either going to force you to quit or they are going to fire you or take a long vacation and refuse to 'rehire' you.
Our only aim is to not give the management any strong reason to (legally) fire you and get you till your upcoming surgery with a stable income after which you can probably get back on your feet but in the meantime, keeping looking for a new job, be clear about your situation (surgery and leave situation), reach out to your friends and family to get some support in finding a better workplace and manager.
If management or anyone brings up taking the vacation again, just thank them with a simple and add that you can manage without it. Show them it isn't affecting you in the least and really don't let that bother you, don't think about it and continue to focus on your yourself and your work at hand.
Just a friendly note: Even after all this, your Manager could still fire you without much standing (or reason) without looking out for its legal implications because..well India's judicial system is very slow, to say the least.
All the best, my friend. Please do update the question to tell us about your surgery and job status. Thank you.
Note: I didn't focus on another important aspect in my answer which is to look and reach out to people who are on your side and are possibly in a position to help you out in your situation, this could be your higher management, boss's boss, HR, clients, teammates, anybody who you have day-to-day interaction with and has a positive point of view towards you but this might not be applicable to small size companies like OP described because in such small-sized companies the power is often vested in one person.