IPhone 3GS does not activate after upgrade to iOS 5.1

I never had any issues upgrading the iphone 3GS in the past. Last January I got my iphone upgrade to iPhone 4S, which made my 3GS redundant, so I had asked Vodafone uk to get it unlocked for me so that I can use it with other networks. Vodafone sent the information to apple and got the iphone unlocked for me. The OS was 4.1 then. A few days ago I came to India on my business trip for 4 weeks and inserted an indian SIM and it worked fine. but just yesterday I tried to upgrade it to iOS 5.1 through itunes and it got stuck in recovery mode then I tried to restore it and found that it has indeed loaded the iOS 5.1 as it asked me questions relating to language and country and tried to access wifi for iCloud. But it has got stuck just there and says no SIM inserted.
Please help .....

This indicates that the phone was carrier locked and had been 'hacked' to unlock it. Updating the phone has re-locked it to the original carrier.
ONLY the carrier it is locked to can authorize unlocking it. Not all do so. Contact the carrier and find out what their policy is.
If it's locked to AT&T, you may as well sell it and buy a new phone. AT&T will not unlock iPhones for any reason.

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