Hi Balaji. I've had that problem, but it usually happens when I've forgotten the correct password.
So what was the problem after all?
Its a path problem,intially i gave it like
AuthUserFile .htpasswd
then i gave the full path like
AuthUserFile /home/guest/balajidl/public_html/protectedfolder/.htpasswd
it worked.
I guess AuthUserFile ./.htpasswd will also work
I guess i am eating lot of Windows.
Thanks Pauline