Hello there anuragsh1,
I was looking into our resources about what may be causing the error about the SIM being unsupported and found some information that may help. It is from the article named iPhone: About unlocking found here: http://support.apple.com/kb/HT5014.
Follow the steps below if you experience issues or receive the following error message displayed in iTunes or on your device:
"The SIM card inserted in this iPhone does not appear to be supported. Only compatible SIM cards from a supported carrier may be used to activate iPhone. Please insert the SIM card that came with your iPhone or visit a supported carrier store."
Your iPhone was almost certainly not officially unlocked but rather was jailbroken to unlock it, and restoring has removed the unlock and has relocked the iPhone back to the original carrier. You will need to determine who the original carrier is and contact them to ask if you would be eligible for unlocking. Many carriers will unlock only for the person which whom they had the contract, so you may need to contact the person from whom you purchased the iPhone to assist.