Are there any best practices which define which Operating System Upgrade Path we should choose and any rational behind it?
Path 1: Upgrade Database OS then Upgrade Application OS.
Path 2: Upgrade Application OS and then Upgrade DB OS.
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You don't upgrade an OS or a RDBMS version. The safest thing to do is to prepare a new server with latest OS and latest RDBMS version and migrate everything to that server so in case there are problems you can rollback.
Here the steps:
Are you encountering problems in your new Server PROD 2023?
Roll back and point your application to the previous Server PROD and everything will work like before.