In the process the WAT detected that my OS was not authentic and the computer behaving queerly, like, my desktop turning black, my Antivirus (Microsoft Security Essential) showing "expiry" warning messages.
I freaked out a bit because with my current situation I am in no position to install a new OS with the amount of installing of various software, backups and etc...
I worked around a simple solution instead. I simply restored my system to a day earlier before the WAT was updated and voila the process worked!
Else you can try one of the solutions mentioned here: http://geekmontage.com/how-to-uninstall-windows-7-activation-update-kb971033/