Assembly Binding Issue in asp.net web application, Enabled Fusion Log

I am working on legacy web application and I am getting run time assembly binding error (FileNotFoundException)

I looked into application base directory and can confirm that required DLL with correct version and public token is available under bin/ directory.

I enabled Fusion Log on server to capture details and realized that CLR is probing for assembly in GAC first (I think this is by design for signed assemblies) Below is log for quick reference :

I am able to make it work by installing assembly in GAC - but question and curiosity still remains open why CLR did not picked it from application base directory after it is not found in GAC ?

Also from below log it appears that after GAC, search is performed under directory C:Windows/System32 vs my application directory. I think it's because also logs says it's Running under executable C:\Windows\system32\dllhost.exe

Any help/comment appreciated !!

*** Assembly Binder Log Entry  (6/28/2018 @ 4:18:02 AM) ***

The operation failed.
Bind result: hr = 0x80070002. The system cannot find the file specified.

Assembly manager loaded from:  C:\Windows\Microsoft.NET\Framework64\v4.0.30319\clr.dll
Running under executable  C:\Windows\system32\dllhost.exe
--- A detailed error log follows. 

=== Pre-bind state information ===
LOG: DisplayName = Microsoft.IdentityModel.Clients.ActiveDirectory, Version=3.19.3.10102, Culture=neutral, PublicKeyToken=31bf3856ad364e35
 (Fully-specified)
LOG: Appbase = file:///C:/Windows/system32/
LOG: Initial PrivatePath = NULL
LOG: Dynamic Base = NULL
LOG: Cache Base = NULL
LOG: AppName = dllhost.exe
Calling assembly : (Unknown).
===
LOG: This bind starts in default load context.
LOG: No application configuration file found.
LOG: Using host configuration file: 
LOG: Using machine configuration file from C:\Windows\Microsoft.NET\Framework64\v4.0.30319\config\machine.config.
LOG: GAC Lookup was unsuccessful.
LOG: Attempting download of new URL file:///C:/Windows/system32/Microsoft.IdentityModel.Clients.ActiveDirectory.DLL.
LOG: Attempting download of new URL file:///C:/Windows/system32/Microsoft.IdentityModel.Clients.ActiveDirectory/Microsoft.IdentityModel.Clients.ActiveDirectory.DLL.
LOG: Attempting download of new URL file:///C:/Windows/system32/Microsoft.IdentityModel.Clients.ActiveDirectory.EXE.
LOG: Attempting download of new URL file:///C:/Windows/system32/Microsoft.IdentityModel.Clients.ActiveDirectory/Microsoft.IdentityModel.Clients.ActiveDirectory.EXE.
LOG: All probing URLs attempted and failed.

*** Assembly Binder Log Entry  (6/28/2018 @ 4:18:02 AM) ***

The operation failed.
Bind result: hr = 0x80070002. The system cannot find the file specified.

Assembly manager loaded from:  C:\Windows\Microsoft.NET\Framework64\v4.0.30319\clr.dll
Running under executable  C:\Windows\system32\dllhost.exe
--- A detailed error log follows. 

=== Pre-bind state information ===
LOG: DisplayName = Microsoft.IdentityModel.Clients.ActiveDirectory, Version=3.19.3.10102, Culture=neutral, PublicKeyToken=31bf3856ad364e35
 (Fully-specified)
LOG: Appbase = file:///C:/Windows/system32/
LOG: Initial PrivatePath = NULL
LOG: Dynamic Base = NULL
LOG: Cache Base = NULL
LOG: AppName = dllhost.exe
Calling assembly : (Unknown).
===
LOG: This bind starts in default load context.
LOG: No application configuration file found.
LOG: Using host configuration file: 
LOG: Using machine configuration file from C:\Windows\Microsoft.NET\Framework64\v4.0.30319\config\machine.config.
LOG: GAC Lookup was unsuccessful.
LOG: Attempting download of new URL file:///C:/Windows/system32/Microsoft.IdentityModel.Clients.ActiveDirectory.DLL.
LOG: Attempting download of new URL file:///C:/Windows/system32/Microsoft.IdentityModel.Clients.ActiveDirectory/Microsoft.IdentityModel.Clients.ActiveDirectory.DLL.
LOG: Attempting download of new URL file:///C:/Windows/system32/Microsoft.IdentityModel.Clients.ActiveDirectory.EXE.
LOG: Attempting download of new URL file:///C:/Windows/system32/Microsoft.IdentityModel.Clients.ActiveDirectory/Microsoft.IdentityModel.Clients.ActiveDirectory.EXE.
LOG: All probing URLs attempted and failed.

*** Assembly Binder Log Entry  (6/28/2018 @ 4:18:03 AM) ***

The operation failed.
Bind result: hr = 0x80070002. The system cannot find the file specified.

Assembly manager loaded from:  C:\Windows\Microsoft.NET\Framework64\v4.0.30319\clr.dll
Running under executable  C:\Windows\system32\dllhost.exe
--- A detailed error log follows. 

=== Pre-bind state information ===
LOG: DisplayName = Microsoft.IdentityModel.Clients.ActiveDirectory, Version=3.19.3.10102, Culture=neutral, PublicKeyToken=31bf3856ad364e35
 (Fully-specified)
LOG: Appbase = file:///C:/Windows/system32/
LOG: Initial PrivatePath = NULL
LOG: Dynamic Base = NULL
LOG: Cache Base = NULL
LOG: AppName = dllhost.exe
Calling assembly : (Unknown).
===
LOG: This bind starts in default load context.
LOG: No application configuration file found.
LOG: Using host configuration file: 
LOG: Using machine configuration file from C:\Windows\Microsoft.NET\Framework64\v4.0.30319\config\machine.config.
LOG: The same bind was seen before, and was failed with hr = 0x80070002.
ERR: Unrecoverable error occurred during pre-download check (hr = 0x80070002).

*** Assembly Binder Log Entry  (6/28/2018 @ 4:18:03 AM) ***

The operation failed.
Bind result: hr = 0x80070002. The system cannot find the file specified.

Assembly manager loaded from:  C:\Windows\Microsoft.NET\Framework64\v4.0.30319\clr.dll
Running under executable  C:\Windows\system32\dllhost.exe
--- A detailed error log follows. 

=== Pre-bind state information ===
LOG: DisplayName = Microsoft.IdentityModel.Clients.ActiveDirectory, Version=3.19.3.10102, Culture=neutral, PublicKeyToken=31bf3856ad364e35
 (Fully-specified)
LOG: Appbase = file:///C:/Windows/system32/
LOG: Initial PrivatePath = NULL
LOG: Dynamic Base = NULL
LOG: Cache Base = NULL
LOG: AppName = dllhost.exe
Calling assembly : MS.UST.EC.Oem.ServiceProxy, Version=1.0.0.0, Culture=neutral, PublicKeyToken=0753af11def5a5f8.
===
LOG: This bind starts in default load context.
LOG: No application configuration file found.
LOG: Using host configuration file: 
LOG: Using machine configuration file from C:\Windows\Microsoft.NET\Framework64\v4.0.30319\config\machine.config.
LOG: The same bind was seen before, and was failed with hr = 0x80070002.
ERR: Unrecoverable error occurred during pre-download check (hr = 0x80070002).

The EXE image C:\Windows\system32\dllhost.exe is known as the "COM Surrogate" host. When you want to activate a COM+ component service, and not load it in your own process (for security or stability), dllhost.exe will be invoked to load the component and expose it as an "out of process" activation, then communicate back to your process via some transparent proxy channel, allowing the calling program to pretend that the component is loaded locally.

What this means is that you likely have some code which is being accessed via a COM+ interface and getting launched out-of-process. This code in turn is trying to load the Microsoft.IdentityModel.Clients.ActiveDirectory assembly. The problem is, it's not in your process anymore, and won't participate in any binding policy you've setup (private bin path, binding redirects, etc). This is why you see it trying the GAC first and then failing to find your dll - it's not your process.

Look for any component you might be loading which is a COM component: are you using some COM TypeLib, or a Runtime Callable Wrapper to some COM dll, or do you have any code which inherits System.EnterpriseServices.ServicedComponent?

If you can find where the out-of-process COM component is being launched, you may be able to refactor it to bring the logic in-process and fix your loading issues this way. Otherwise you'll have to put the assemblies in the GAC.