India cannot withhold payments for existing contracts it has signed unless it wants to cancel those contracts. The French can turn around and say that India is in breach of the terms of the contract and suspend the delivery of spare parts and all support and maintenance activities.
I don't see France giving up the source code as they are very protective of their intellectual property. Right now, India is better off pausing any further purchases of the Rafale and focussing on getting the Su30MKI Super programme complete with a full Indian ecosystem and then starting working on an integrated Indian air defence network where everything works together more seamlessly.
The source code of the Rafale is not the problem as India has that capability for the Su30MKI fleet, and we can see that jet did not fair any better. You have to assume that jet is fully integrated into the Indian IADS to its full capabilities as of now.
The issue of the source code is probably more about getting information and software that will feed into the AMCA programme and trying to boot strap that programme with capabilities that they cannot develop on their own, or will take too long to develop.