Hi Waseem,
I don't think this is an error with your topography.
MIKE SHE cannot interpolate Integer Grid Codes, such as Vegetation and Soils codes.
All of these must be integer multiples of the Model Domain. That is, each grid cell must have 4 or 9 or 16, etc vegetation types.
This restriction can also can trouble when the origns for the grid files are not aligned.
The easiest way to resolve this is to use the "Create" buttons on the individual dialogs after you have set up your grid. This will ensure that all your grid files are the same as your domain.
Otherwise, you can also edit the geographic properties of the grid files in the Grid Editor.
Regards,
Douglas