Ok. Here is how solved it. I found it is a bug in Play 1.2.x. So, I have implemented the FunctionalTest class provided by the framework by extending it and overridden the POST method.
In overridden POST method added this code
if (savedCookies != null) { // savedCookies is there in FunctionalTest class
if (request.cookies != null) {
request.cookies.putAll(savedCookies);
} else {
request.cookies = savedCookies;
}
}
And then use this extended class in my testcases.