Karthi,
I had a similar issue with a 7941 and it cleared up after I unplugged the cable, # key pressed, plugged the cable back in with the # key pressed. I was about to use the key sequence that is used with 7960s and 40s to factory reset the phone, but didnt have to. Magically it worked.
Sankar.
Sankar Nair
UC Solutions Architect
Pacific Northwest | CDW
CCIE Collaboration #17135 Emeritus