I did a brainstorm yesterday and went through the entire configuration of the Nagios server. It took me 4 hours to find out few of the issues. The issue with the graphs seems to have been fixed and i see them being populated properly now and also the 2 files that were growing in an alarming manner have been fixed with data being generated in perfdata after being spooled. How this was solved was by making changes in the main 'nagios.cfg' file. As i re-installed pnp4nagios with Bulk+npcd mode, in the main configuration file: host_perfdata_command & service_perfdata_command don't have to be defined and i commented them out. Also, i found out that nothing in 'commands.cfg' was being executed by testing it and hence in the main 'nagios.cfg' i found out that the object configuration file path of 'commands.cfg' was commented out( i have no idea how this happened). I removed the comment and restarted the nagios service and i saw data being properly accumulated how it is supposed to.
However, there is one thing that is still odd and that is the 'process_performance_data=0' option is set in nagios.cfg but still performance data is being processed. This is the only odd thing happening right now.
Let me know if anyone can help or someone has faced such an issue.