The problem is the proxy out institute using is "SQUID".And Squid doesn't support Expect: 100-continue.
So finally added this to my options
curl_setopt($ch, CURLOPT_HTTPHEADER, array('Expect:'));
and its all working fine.
if above solution does not work please add
curl_setopt($ch, CURLOPT_HTTPHEADER, array("Content-type: multipart/form-data",'Expect: '));