When i drill down from one Report Definition to another Report definition it is working fine. But if I drill down one more level then the UI of the third report definition is distorted. However if I run the last drill down as standalone or even called from another Report Definition it is working fine. The problem only comes when its the third level.
You said that drill down from report 1 to report 2 is fine but drilling down one more level to report 3 causes report 3's layout to be distorted.
Have you tried running report 2 first, and then drilling down from report 2 to report 3? Does the layout get distorted in report 3 if you started from report 2? That is, simulate a 1-level drill down only to test if the problem is indeed caused by a 2-level drill down or if it's simply an issue with drilling down from report 2 to report 3.