Answering my own question in the hope it can help others, or myself in the future.

I managed to get more information of the error by running an update with the azure cli Upgrade an Azure Kubernetes Service (AKS) cluster.

You can also use the cli to check for available updates. Check for available AKS cluster upgrades.

Using the cli seems to be a bit more informative when troubleshooting.

AKS Cluster in Failed Status

When you perform an operation on Kubernetes (AKS), the operation may fail for MANY reasons, such as an upgrade operation, unavailability of quotas, nodes turned off, memory pressure, misconfiguration, etc. So, when any operation fails, the cluster enters a "Failed" status!

The solution may depend on what caused the error, but a simple way to try to solve this issue is to rescale the failed nodes:

• Just click on the node with a "Failed" status, then click on "Scale node pool."
• When the pop-up opens, click on "Apply" without making any changes. This will trigger an operation that will re-provision the node and possibly solve your problem.

Another simple way is to send an empty upgrade operation with no version defined.

DISCLAMER: On current az cli version (2.45.0), when you don't define a specific version to upgrade AKS, AKS will upgrade to the current version. So before proceeding with this approach check if this is the behavior on your cli version!

To perform this operation, you will need to use the Cloud Shell or the az CLI, ensuring that you are on the correct tenant. The command to perform the operation is:

az aks upgrade --resource-group <resource_group_name> --name <cluster_name> --yes --debug

Note: When using the az CLI to manage Kubernetes, use the --debug flag during the operation! This will be VERY helpful in understanding what is happening during the upgrade process, allowing you to check for errors and take appropriate action. The --yes flag is used to skip the confirmation dialog.

Azure Kubernetes Service cluster in a failed state

please go ahead and do reconcile the cluster.

Reconcile command: az resource update --name xxxxxx --namespace Microsoft.ContainerService --resource-group xxxx --resource-type ManagedClusters --subscription xxxxx

For my case issue was with PDB for ingress controller namespace. I deleted the PDB first

kubectl delete pdb ingress-nginx-controller -n ingress-basic 

Secondly I reconciled the AKS cluster

az aks update --resource-group {RG} --name {ClusterName} 

Lastly did the same for my node pool and issue was fixed.

az aks nodepool update \ --resource-group {RG} \ --cluster-name {ClusterName} \ --name {{NODEPOOL}}