I've solved the problem with OUT parameters :p !! This seems to be a problem with the ODBC stack of Microsoft !! Problem does not arise with other drivers !! This problem arises not only with the ODBC-JDBC driver but with apps like Visual Basic, VC++, etc with use MS ODBC stack !!
Do not return Resultsets with OUTPUT parameters !! This does not work. The solution is to split the stored procedures into two procedures, one returning the OUTPUT parameter (if required) and another returning the resultset. Another workaround would be to include the OUTPUT parameter as another Column in the Resultset !! MS ODBC, JDBC client drivers do NOT allow you to return OUTPUT parameters with resultsets !! If you return either one of them alone no problem comes !!
Hope this helps you people out there facing the same problem ;)