I had solved it using ..
1) Enter the relevant directory (use> locate server.key)
2) Back up old server.key link.
3) Copy ssl-cert-snakeoil.key to server.key
4-5) Change its owner & group to postgres
6) Ensure the permissions are 700 or 740 (as requested by error message)
Recipe for my Ubuntu 12.04 & postgresql-8.3:
sudo cd /var/lib/postgresql/8.3/main/
sudo mv server.key server.key-0
sudo cp /etc/ssl/private/ssl-cert-snakeoil.key server.key
sudo chown postgres server.key
sudo chgrp postgres server.key
sudo chmod 740 server.key
sudo /etc/init.d/postgres-8.3 start
And now its working !
Thanks for support.