Folks,
Add user is working fine.
When i pointed it to the correct location of notes id file (which i created) it worked fine.
I was pointing to notes.ini file available in lotus/domino or lotus/notes.
I have been installing BESUserAdminService on the same machine as BES Server (with exchange) for all these years and it had worked fine.
(Right now all the components are on the same machine)
Info: How to create Notes Id file for a user is available
here