Hi All,
I think I found the "real culprit" who was causing the error.
While I was checking the settings for the VM i noticed that a PCI Device passthrough has been configured. See below:
The above says when a passthrough is present you can't take a snapshot 
.
So please someone tell me whats the purpose of this RAID Card Passthrough ? since a VM is given a virtual hard disk by ESXI & the VM need not know of any RAID controller i just cant understand why this function is there. According to me, the ESXi layer will take care of writing to the RAID controller (raid 1).
Kindly let me know what are the consequences of removing the PCI device 0. The VM contains the Windows 2008 SBS guest with Active Directory, Exchange,Ms SQL Server running.