Since Approval process cannot be packaged in 2GMP , as a work around I removed the approval process folder alone from 2GMP and created a managed package with classes,LWC,Objects,Worksflows etc.
and got version as like below

"namespace": "MMR",
 "packageAliases": { "OVION Managed@0.1.0-5": "04t2w0000XXXXXX" }

Then I am trying to create a unlocked package with approval process alone which depends on the above 2GMP and here is the configuration in 

sfdc-project.json

{ "packageDirectories": [ 
{ "path": "source-folder", 
"default": true, 
"package": "Process Check", 
"versionName": "ver 0.1",
 "versionNumber": "0.1.0.NEXT", "
dependencies": [ 
{ "package": "OVION Managed@0.1.0-5" } ] }
 ], 
"namespace": "", "sfdcLoginUrl": "https://login.salesforce.com",
 "sourceApiVersion": "50.0", 
"packageAliases": {
 "Process Check": "0Ho2w000000XXXXX", 
"OVION Managed@0.1.0-5": "04t2w0000XXXXXX" }
 }

When I tried to create version for the unlocked package with command

>sfdx force:package:version:create --package "Process Check" --installationkeybypass --wait 20

CLI is checking for dependencies and getting error as like below
ERROR running force:package:version:create: Extension__c.ExtensionTierApproval: Entity 'Extension__C' not found.

Request in progress. Sleeping 30 seconds. Will wait a total of 1140 more seconds before timing out. Current Status='Verifying dependencies' 
Request in progress. Sleeping 30 seconds. Will wait a total of 1110 more seconds before timing out. Current Status='Verifying dependencies'
 Request in progress. Sleeping 30 seconds. nds. Will wait a total of 930 more seconds before timing out. Current Status='Verifying dependencies' 
Request in progress. Sleeping 30 seconds. Will wait a total of 900 more seconds before timing out. Current Status='Verifying dependencies' 
ERROR running force:package:version:create: Extension__c.ExtensionTierApproval: Entity 'Extension__C' not found.

I am having nearly 10 Approval process but for now I am just trying for only one process(Extension__c.ExtensionTierApproval). So if things are fine thought of to do for remaining 9.
As per error I am having Extension__C Custom object in 2GMP.