Can VFD be used with induction motor for regeneration?
Generally, no.
As an induction motor on a VFD is driven by an external source, the DC Bus voltage on the drive will rise until it faults out on overvoltage.
You can use pulse choppers (in most drives now, and external modules are available as well), to feed resistor banks, but that just makes a large, wasteful heater.

There are VFD's available with Active Front Ends, that can regenerate power back to the line, but they are typically expensive, and not common.  There are external regen units that connect to the DC bus of the drive, ("Bonitron" makes some excellent ones) and the AC line, and actually do pump the excess bus voltage back to the line, but sizing these can be a bit tricky.

Now if you have a multi-motor VFD system, by properly connecting the DC Bus links together (with fuses, up-to voltage enabled contactors and such), you can allow the motoring drives to take up the power from the regenerating drives, but you have to balance out the system.

One more common approach to allow for regeneration is to power the VFD's DC Bus with a regenerative DC Drive; but that only allows generally for typically about 75% continuous regeneration due to voltage limits on feeding the incoming mains.  One manufacturer used to get around that by providing a transformer to control how power was delivered back to the mains.

Hope that helps.