Application ELB route traffic to new added instance before grace period

Finally I resolved my issue. I am writing my solution here to help anyone else here facing same issue.

In my case, my initial feeling was that Application Load Balancer is routing traffic to newly added instance before it is ready to serve. But detailed investigation showed that was not the issue. In my case new instance was able to serve traffic at start and after few mins it was generating this ELB level 502 error for around 30 seconds and after that it starts working normally.

Solution:
The Application has a default connection KeepAlive of 60 seconds. Apache2 has a default connection KeepAlive of 5 seconds. If the 5 seconds are over, the Apache2 closes its connection and resets the connection with the ELB. However, if a request comes in at precisely the right time, the ELB will accept it, decide which host to forward it to, and in that moment, the Apache closes the connection. This will result in said 502 error code.

I set the ELB timeout to 60 seconds and the Apache2 timeout to 120 seconds. This solved my problem.