Solution:

  The problem was with the TERM variable. I changed the TERM variable to vt100 and it 
started working fine. however i could not take advantage of the user friendly features 
of LINUX especially in vi editor. So i did the following.

created a file .telnetrc in the root directory and also in /etc/skel/ . i wrote 

  <servername>  environ var TERM = vt100

in the .telnetrc file. this allowed me to maintain TERM = linux when working within 
Linux and sent TERM = vt100 to the other server.

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