Finally , I managed to find the root cause of the problem !!
I have used Iron Jacamar Tool to convert the *-ds.xml from jboss 4.3.GA to jboss 7.1.3 Final. So i noticed that though JTA is not used for the local-datasource in jboss 4.3.GA, this jta element got introduced after Irom Jacamar Migration. I know that JTA is used for distributed transactions. So to solve this problem i disabled the jta parameter by setting it to "false" and now no more errors and the problem is solved.
If anything is wrong in this solution, kindly correct me.
I noticed that the local-datasource is converted as follows,
<datasource jta="true" jndi-name="java:jboss/datasources/MM5_REQMGR" pool-name="MM5_REQMGR" enabled="true" use-java-context="false" use-ccm="true">
<connection-url>jdbc:oracle:thin:@ota-db-nfcdb1:1521:NFCDVDB1</connection-url>
<driver>OracleDriver</driver>
<transaction-isolation>TRANSACTION_READ_COMMITTED</transaction-isolation>
<pool>
<min-pool-size>3</min-pool-size>
<max-pool-size>200</max-pool-size>
<prefill>false</prefill>
<use-strict-min>false</use-strict-min>
<flush-strategy>FailingConnectionOnly</flush-strategy>
</pool>
<security>
<security-domain>SecuredREQMGRLogin</security-domain>
</security>
<validation>
<valid-connection-checker class-name="org.jboss.jca.adapters.jdbc.extensions.oracle.OracleValidConnectionChecker"/>
<validate-on-match>false</validate-on-match>
<background-validation>false</background-validation>
<use-fast-fail>false</use-fast-fail>
<exception-sorter class-name="org.jboss.resource.adapter.jdbc.vendor.OracleExceptionSorter"/>
</validation>
<timeout>
<idle-timeout-minutes>15</idle-timeout-minutes>
</timeout>
<statement>
<track-statements>false</track-statements>
</statement>
</datasource>