Hi Shruti,
The item status is not validated by standard, so the system is working as designed.
Following wiki site is partly about this topic:
http://wiki.sdn.sap.com/wiki/x/KIlRCw
You have to delete the inactive items from the repository if you don't want that users create shopping cart from Old Shopping Carts and Templates.
During the validation only product ID and quantity are sent to the catalog, where it is checked if the product exists and if it exists, what is the correct actual price for that quantity.
Regards,
Timea