Initially Test Class was not reading web.xml file but after setting context directory in setup() that issue is resolved.
The code snippet of web.xml where the issue is occuring is as under:
There is velicity related servlet defined above this servlet and its working fine. The code is giving same error even if I remove all <init-param> in above class. Unfortunately I cannot share the code due to organisational directives. Pointers in resolving the issue would be appreciated.