Cheers! Problem got resolved.
There were no appropriate intantiation of the phone number field of the mSmsManager.sendTextMessage() method. Alas! how silly mistake i made which took some time to figure out. I believe i got mislead because of nesting of onClickListener() methods. He he…
I am reposting the correct code to let be helpful for others.
public class DialogActivity extends Activity 
{   
    private Dialog mDialog;
    String editTextEnterMobileNum;
    @Override
    protected void onCreate(Bundle savedInstanceState) 
    {
        super.onCreate(savedInstanceState);
        AlertDialog.Builder builder = new AlertDialog.Builder(this);
        builder
        .setTitle("Incoming Server Message")
        .setMessage("text")
        .setCancelable(false)
        .setPositiveButton("eReceipt?", new DialogInterface.OnClickListener() 
        {
            public void onClick(DialogInterface dialog, int id) 
            {
                dialog.cancel();
                mDialog = new Dialog(DialogActivity.this);
                mDialog.setContentView(R.layout.ereceipt_dialog);                       
                mDialog.setTitle("User Input");
                final EditText phoneNo = (EditText) mDialog.findViewById(R.id.eReceiptEditText);
                mDialog.findViewById(R.id.eReceiptOkButton).setOnClickListener(
                        new OnClickListener() {
                            @Override
                            public void onClick(View v) {
                                dismissDialog();
                                String number = phoneNo.getText().toString();
                                try{
                                    android.telephony.SmsManager mSmsManager = android.telephony.SmsManager.getDefault();
                    mSmsManager.sendTextMessage(number, null, SmsReceiver.msgContent, null, null);
                                    Toast.makeText(getApplicationContext(), "Your SMS has sent successfully!", Toast.LENGTH_LONG).show();
                                }
                                   catch(Exception e){
                                        Toast.makeText(getApplicationContext(), "Your SMS sent has failed!", Toast.LENGTH_LONG).show();
                                        e.printStackTrace();
                                   }                        
                            }
                        });
                mDialog.show();              
          }
        })
        .setNegativeButton("Exit", new DialogInterface.OnClickListener() 
        {
            public void onClick(DialogInterface dialog, int id) 
            {
                dialog.cancel();
            }
        });
        AlertDialog alert = builder.create();
        alert.show();
        //finish();
    }
    public void dismissDialog() {
        if (mDialog != null) {
            mDialog.dismiss();
            mDialog = null;
        }
    }
}
solved Why android.telephony.SmsManager is not able to send message from Dialog Activity?