Hi Chetan,
If you take a look in the geogrid/GEOGRIB.TBL file, you can see that the path for 'default' and for 'modis_30s_lake' points to the same dataset (modis_landuse_20class_30s_with_lakes). Did you happen to try just leaving the geog_data_res setting to 'default' and running avg_tsfc.exe? If so, was that successful? If it was, then I'm not sure why setting it the other way would cause an issue, but it should be fine to leave as just 'default.' Let me know if this is not the case. Thanks!