Environment
RHEL = 5.9
Cluster nodes = 2
IP of cluster node 1 = 192.7.163.58
IP of cluster node 2 = 192.7.163.59
Virtual IP for Application = 192.7.163.50

We have cluster configured for a home made application. When my application connects with its database on same VLAN, the connection establishes via physical IP. However when my application connects with those machines who are not the part of same VLAN, then , the connection establishes via virtual IP.

Are you sure this is correct? You should always be connecting to the VIP to ensure you are always connecting to the Active Node.
What makes you think that it is not connecting to the VIP?

PHYSICAL IP of cluster node 1 = 192.7.163.58
PHYSICAL IP of cluster node 2 = 192.7.163.59
Virtual IP for Application = 192.7.163.50

The clustered application is a middle tear application. This application needs to connect with its DB when it connects, we ran the command netstat -an|grep PHYSICAL IP , the result shows the PHYSICAL IP but when we ran the same command (netstat -an|grep VIRTUAL IP)for Virtual IP, nothing returned except a prompt.

However when we run the above command on some other entities outside VLAN, the returned IP after running this command netstat -an|grep VIRTUAL IP is Virtual IP.

WHY ? SHOULD BE PHYSICAL IP OR EITHER VIRTUAL IP

Couple of questions:

1. What system are you running these commands on? Active or Standby?
2. How are you logging into the systems? Using VIP or Physical IP?

1-) On Active Node (as my application and virtual ip is online on active node).
2-) Sometimes I login from vip or sometimes i login via physical ip.

can you post the output of your netstat in between [ code ] tags?
Also state if you logged in with the VIP or Static IP.