We are using Sun JDK 1.5

Well, the problem is resolved. The issue was with JMS connection factory. There 
is some memory leak with 'RMIConnectionFactory'. We changed our code to use 
'java:/ConnectionFactory' [in memory connection factory] and now the memory is 
settling down properly.

Just to add:
The leak in RMIConnectionFactory is visible, if we have a client which calls 
stateless session bean and this SLSB in turn pushes a message to JMS Queue. 

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