Hi Vijay
One definite possibility is that the application is displaying a message and waiting for the user to interact with it. There's no way to suppress this, which is a big reason why what you're trying to do (automate Word server-side) is neither recommended
nor supported.
Another possibility is that the application has "crashed", due to something in the server environment that's not allowing Documents.Add to execute properly. If this is Word 2010, for example, and the template is on the network there could be problems.
There's really no way to tell without being able to see what's going on with Word on a monitor.
The correct way to generate Word documents server-side is to use Open XML (see OpenXMLDeveloper.org) which doesn not require or use the Word APIs at all.
Cindy Meister, VSTO/Word MVP