I could not possibly find what would have gone wrong, because inside the virtual machine, the disk space utilized was not compensating to the usage of the host disk space usage.
Things I have done to get the disk space usage within limit.
- Open VM Player, select the virtual machine, Click Edit Virtual Machine Properties.
- Select the disk drive and from the utilities dropdown list select "Defragment Disk"
- Problem I faced while shrinking was, there should be enough space available in the host drive for the shrink to happen.