fix: review internal server errors

[swarmHaseeb]

Checklist

• [x] I have read the coding guide
• [ ] My change requires a documentation update and I have done it
• [x] I have added tests to cover my changes.
• [x] I have filled out the description and linked the related issues

Description

Please refer to issue for description

Motivation and context (Optional)

This pr is focused on improving error handling and writing better response for errors.

Related Issue (Optional)

fixes #3240

Screenshots (if appropriate):

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This change is