Hey @kaushal welcome to the Nextcloud community 
does this only occur with that one user name or does it occor with any user account you’re trying to create?
- check if that user exists
occ user:list - enable that user if exists
occ user:enable <username> - delete that user
occ user:delete <username> - recreate that user
occ user:add <username>
if that occurs with any user, then check your available disk space