You can submit your application for sponsorship without passport. once she receives any letter from IRCC she can attach that along with the self attested letter why she never renewed the passport and apply for renewal.
In this case passport has been expired for more than 3 years so she needs approval from Indian consulate in Canada for the application
otherwise BLS will return her application.
If you are in Toronto there is open house at consulate every Wednesday at 3. She can take her file there and get approval quickly. Then submit passport renewal application at BLS. Also she will need to add the Canadian passport for the sponsor. I hope this answers your question.
Thank you so much for this!