Thanks, I got my hint from here. I changed my code to:

sed "/DNGGF10/s/`grep DNGGF10 test|cut -d ':' -f2`/$1/" test >test.chk

Now I am able to replace text only that paritucular line but the space after None are still getting altered which should not happen.

Line before replacing text:

DNGGF10 :None :Test (4 Spaces after None)

After running the script as ./script abc

DNGGF10 :abc:Test

While there should be five spaces after abc.

Kindly suggest.

Regards,
Yogi