Thanks for all your help.
I know I made a silly mistake and took a lot of time from you for this issue. Sorry for the trouble
I found the reason why the email was not getting sent.
My contact was not a nagios user because of which xi_service_notification_handler was not trigerring an email. Later I configured a user which was also a contact and mail got triggered.
One more thing that can help if any one else face this issue. User which we create should be a monitoring contact otherwise mail will not trigger.