I solved it.Working Fiddle
Issues that were causing failure:
Bootstrap I had to put style="width:XX;height:XX" in image tag too along with normal width and height parameter to overwrite bootstrap img{} css definitions which were one of problems.
<img class="lazy" width="200" height="300" style="width: 200px; height: 300px;" data-original="abc.jpg" src="lazygrey.gif">
vars Before AJAX: Since I am using ajax content so var defined like
var $imgs= $("img.lazy");
before ajax call doesnot work. So to be safe I used $("img.lazy") directly.