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Thanks Carlos. The value was getting overridden in startweblogic.cmd for Sun jdk but was not sufficient for my problem as I was using Jrockit and with JRockit there is no Permsize issue inturn there was OOM.
I followed these steps:
1. changed maxpermsize in startweblogic.
2. Tried increasing system swap space.
3. Used a profiler which controls JVM running, tried reduce memory leaks, but none worked.
I switched to JRockit for weblogic
1. tried increasing memory etc. Finally I switched to 64 bit machine as suggested in one of the forums for JRockit oom.
Now both jdk and JRockit weblogic with all SOA components working successfully.