I need to read the Active Directory, search users and create user functionality.
I am able to use DirectoryEntry in C# and Domain is only physical server.
The error you are getting is referall related:
ERROR_DS_REFERRAL 8235 (0x202B) A referral was returned from the server.
You can find the error codes linked at this MSDN Article.
Your problem looks like a DNS problem. I know writting that, I've got statisticaly 80% chance being right. Check the domain name resolution from your client. Check your DNS and verify that your two domain controlers are well registered.
0000202B: could mean wrong DN/searchbase like incorrect DC value etc.