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thanks for you answer, I solved the issue.
It was not about the code. Application working on one machine proves that.
I examined the differences on two system, found out that one using Internet Explorer 8(faulty) the other using IE 7(correct).
I uninstalled IE 8 and voila! it worked.
I suppose it is about the character anomaly between IE 8 and server interaction. Don't really know what lies underneath, just guessing.