OOTB Approval Workflow Error: Cancelled - The workflow could not update the item, possibly because one or more columns for the item require a different type of information.

We are facing a strange issue with OOTB Approval Workflow. Whenever a document is selected for publishing workflow just terminates and status is shown as "Cancelled" . On clicking this cancelled hyperlink following is visisble - The workflow could not update the item, possibly because one or more columns for the item require a different type of information.

Date Occurred || Event Type || User ID || Description || Outcome  
 
10/27/2011 2:02 PM Error || System Account || The workflow could not update the item, possibly because one or more columns for the item require a different type of information. || Access Denied

This issue is replicable only on a particular site collection on a web application.

Here are the workflow details-

Task List : Tasks
History List : Workflow History
Start Options : Start this workflow to approve publishing a major version of an item.
Enable Content Approval: Update the approval status after the workflow is completed (use this workflow to control content approval).

Doc Library Settings-

Require content approval for submitted items : Yes
Create major and minor (draft) versions
  Example: 1.0, 1.1, 1.2, 2.0  
Who should see draft items in this document library? : Any user who can read items
Require documents to be checked out before they can be edited? Yes

Note:

There is no error trace in Sharepoint diagnostic logs or event viewer(on verbose setting). We also tried Collect Feedback Workflow and it is working fine as expected on same doc lib (with same set of supporting lists- task and workflow history)