Very strange issue and after doing lot of searching and troubleshooting the issue was fixed by the below:
The error was coming in creating a new folder and adding a user for site access.
- SharePoint Search Host Controller service may need to restart to free up some memory space.
- Anonymous Authentication was disabled in IIS. – This fixed the issue for me!
- “minFreeMemoryPercentageToActivateService” attribute is not set to serviceHostingEnvironment Tag in Web.Config.
- The farm wasn’t updated with at least March 2013 PU / Service Pack 1.
In case of you got “The server was unable to save the form at this time. Please try again.” for a specific user. – If your list has unique permissions and a user/group has permissions only on that list and has limited or no access at the site level, then you run into this error.