Hi @Vinod Survase ,
Does M365 Defender & EOP has capability to detect password protected files to during the email delivery and ZAP process of the email in user mailbox?
No. Based on my research, currently M365 Defender & EOP is not capable of detecting or scanning password protected files.
However, you can create a mail flow rules to take actions against mails include password protected attachments:
I tested in my lab by setting up the aforementioned transport rule and then sent a mail which contained a password protect Excel workbook, the mail can be stopped and put into quarantine:
Additionally, below is a link discussing a similar topic for your reference:
Safe attachments and encrypted or password protected attachments
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