Mailserver rejected our "sendmail_from" setting

Dear All,

We are having window2000 server and iis 5.0  in it. We have smtp enabled in our IIS with relay authentication. We have PHP version 4.2.3 running in our IIS. We are trying to send mails from our application and it returns the following error.

Warning: Mailserver rejected our "sendmail_from" setting

We are having the following setting in php.ini file, where the sendmail_from is having a valid email address. We tried by disabling the relay authentication, still it is showing the same error.

[mail function]
; For Win32 only.
SMTP = localhost ; for Win32 only

; For Win32 only.
sendmail_from = magesh_bala@hotmail.com ; for Win32 only

The code in the php file is,
<?
$ae=mysql_query("select admin_email from dev_config");
$indv_data=mysql_fetch_array($ae);
$ae=$indv_data[admin_email];
$sub = "Login For $sitename";
$content = "Dear $u,

Your requested login information is below.

Username: $u
Password: $p

Sincerely,
$sitename
$base_url";

mail($e,$sub,$content,"From: $ae");
?>