No problem was observed when using Chromium Version 85.0.4183.83 (Official Build) snap (64-bit)

I can still reproduce this.

Perhaps setting a custom line-height for Telugu can resolve this.

Telugu, like other dravidian scripts require relatively higher lineheight and our styles provide it. But Lohit Telugu font is very problematic with its metrics.
It has an Ascender 1617 units which exceed the total 1024 em units defined. And the x-height where the most of glyph strokes are supposed to occupy is just 500 units, leaving too much empty space above and below the em square.

The effect can be seen by comparing same text rendering by Noto and Lohit.

Noto Sans Telugu	Lohit Telugu

The height taken by the highligher span is overlapping each other hiding the parts of text as shown in the bug report. Adjustments specific to Lohit Telugu will cause issues with other fonts. Ideally Lohit Telugu need to fix its typography metrics, but as far as I know that font is unmaintained these days.

@santhosh , Thanks for investigating. I enclose sample text snapshots of text in text editor with font as Lohit Telugu and Noto sans at 12 pt and did not find a diff. Could there be some other reason for the difference in behavior in content translation context

Lohit Telugu 12pt	Noto sans Telugu 12 pt

On google chrome(Version 92.0.4515.131 (Official Build) (64-bit)), I observed the problem with Noto sans Telugu also, but the overlap with adjacent lines is far less making it usable.

Upstream bug report for Lohit Telugu https://github.com/pravins/lohit/issues/91