<p>We have a simple [spring-hibernate] application (console app) where in we have set the classpath in manifest file of the executable JAR file. And the app connects to the database using jTDS JDBC Driver, Everything works as expected on Windows machine and JDK 1.6, but on Linux, the app is unable to find the driver, 
We are running the program using java -jar MainClassName.</p>

<p>Any suggestions why this might be happening is greatly appreciated.</p>

Honestly it sounds like bad CLASSPATH. One thing I suggest to start debugging this problem is copying the jtds package to same path as your main packages/classes and see if it works. This way you can assure the Classpath manifest is or isn't the problem. The Spring/Hibernate relies on the lib directory, so it will always be on classpath because it's main structure. Use the lib directory also to test.
Hope this guidelines will help. Also send more information, like paths, classpath and manifest files.