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I have made a spelling mistake in 2nd refree's name in the naturalisation application. Unfortunately the application is submitted and hence I can't make any changes. What are possible solutions to this? I am adding a cover letter to upload on UKVI to explain this. However the refree declaration has correct name spelt on it.
Will my application be introuble ?
Correct name : DARSAN
Filled : DARSHAN

If you have already explained the mistake in a cover letter then that should be ok.
This is not something that will create issues or even a refusal. If UKVI are not happy with a referee they will ask for another one.