Finally got this working, here is what I did,

• Download the sikuli set-up Jar from
  "https://launchpad.net/sikuli/sikulix/1.0.1/+download/sikuli-setup.jar"

• Save this jar in a folder 'SikuliSetup',now create a sub directory
  'Downloads' which will come into picture later.

• Run the above Jar, this will generate two files under the above directory.

• Now run the 'runSetup.bat' file generated from above setup. This will start the setup, now select the 4th and 6th option in the 'sikulisetup' pop-up and click on 'setup Now'.

• The above step will fail for most people due to default security issues.

• If the above step fails then you need to download an offline version of this jar from this URL
  "https://launchpadlibrarian.net/156273987/Sukuli-1.0.1-Offline-Setup-Java-option3-option4.zip".

• UnZip the above file and copy the '1.0.1-3.jar' file to 'Downloads'
  directory created under the 'SikuliSetup' directory previously.

• Now run the 'runSetup.bat' file again, this will generate a new jar file 'sikuli-java' and its dependent libraries under 'lib' folder.

• That's it, now copy this jar 'sikuli-java.jar' to your java build path in eclipse.

• Now Java will use this sikuli libraries without any issues.

• Once after you setup the jar file under build path, restart the
  system and login again.