Error: "An operations error occurred" in System.DirectoryServices.AccountManagement.UserPrincipal.FindByIdentity
The issue was because identity_impersonate was set to true in web.config so the user token which was being passed was a secondary token and hence could not access the Active Directory.
This answer solved my issue.
We had this issue also, but the configuration-file did not had this setting. But after some checking all kinds of options in IIS i found a similar option in the UI.