Update:
Issue got resolved.
Reason for the error: Azure Migrate appliance has been deployed on a vCenter ONE. Discovery was performed. However when replication was initiated for a server SERVER1 in a vCenter TWO, the replication failed.
Resolution:
A single Azure Migrate appliance can perform discovery for multiple vCenter servers, but for replication - the Azure Migrate appliance should be deployed in the same vCenter server that the server is part of. So a new Azure Migrate Appliance has been setup in vCenter TWO and replication for SERVER1 was initiated which succeeded.