Setting The Environment for System.in
With character terminal applications, there are always two ends in the communication, which must agree on how to interpret the control characters. Usually both sides are capable of using a variety of codings described in termcap/terminfo database.
On the Unix server-side you can define the coding by setting the TERM environmental variable, or by using stty (a default is used otherwise, often a dumb terminal emulation).
On the client side you also have to set the same terminal emulation as on the server side. Windows native telnet has the capability to define the emulation (see e.g. Configure the Telnet Terminal Type), as have other terminal emulators (e.g. Putty), too.
Regarding your design decisions: The above terminal setting are usually only described in user documentation, and not hardcoded in application, to leave more flexibility. After all, you do not know in advance which terminal (only a simple hardware terminal, supporting a single termcap coding, perhaps?) your users are going to use.
(As your question has little to do with Java or system.in, so you could re-consider the tags you use.)
You should look into these two posts, as they are related to what you are doing.
As you are running the console on top of the Unix server, redhat in your case, I would also recommend that you look into the Unix command expect, that allows you to read the input in the console application, and performs the action according to the input of the user.
Here are some examples of the command usage.