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XLib: connection to :XX refused by server

We are getting strange behavior from vncserver. It works fine and we are able to establish virtual X display on any number between :0,:1, and :99. But sometimes vncserver fails to initialize the display or something and we are getting Xlib: connection to :* refused by server

We checked authentication and it's not that. Where would be a good place to look for logs?

Any ideas?