okay.. was the post not relevant to the forum since there were so many views but no reply?..
anyway..I got to learn few things from the problem.. got it resolved now..
resetting from back and safe mode didn't work..neither pressing the power key and volume key for hard reset.
thanks to google for relevant links and info
this is what resolved the issue.. anyone who faces such issue in future...
1. connected the phone to computer via usb cable. sony pc companion detected it and recommended to update.
2. updated the software to version 4.3 .. took a long time just to download the update.
3. follow the instruction given on screen to update. takes a while to update..
4. However even after update the offending app was still not letting me do anything..
5. once you have updated, there is an option to repair the phone .. select it and PC companion will warn that all existing data will be lost .. proceed and then let the phone repair process complete. This is what finally resolved the issue but all my earlier apps and settings were lost but I got the phone in usable state at least.
Hope this helps anyone having same issue.