Dear Bert,
thanks for your suggestions.
1. I did in fact make the boot up disk . However it does not allow restoring the system image because it gets stuck with an error message' could not format or partition disk' and it cannot proceed further . I also have a boot up disk from my back up software but as I mentioned it does not recognize the windows system image.
This has been reported by multiple users in the past and in my opinion is a major flaw in MS system imaging
2. I have connected the damaged disk to USB - SATA and was able to access the files but that is not the problem, it is getting the actual computer to work
3. per Indys suggestion , I did try using a installation disk from another computer but it would not accept my licence key for 8.1 pro( I had upgraded from original in 8.1 to Win 8.1 pro) . The original OS came pre installed and I called Lenovo for installation disks which is the only reasonable option left . They will not release the original lic key and want to charge for the disks but I have no choice.I tried recovering the lic key with third party software on the damaged HD but was not successful .
The major frustration for me is that despite regularly imaging my systems and making boot up disks, I was still not able to restore the saved image .
4. When booting from the recovery CD I do not see any option to boot to safe mode
thanks
Bala