Resolution:
The TIBCO-branded Microsoft SQL Server driver supports the use of Windows NTLM (NT LAN Manager) authentication on Windows operating systems through the ‘AuthenticationMethod=ntlm’ connection string property.

To make use of this feature with BusinessConnect follow these steps.

(1)  In your MS SQL server security configuration setup, make sure you are using windows security with domain user.

(2)  Set up TIBCO Administrator server windows services to start with Windows domain user/password as in above step.

(3)  Set up the  the BC JDBC connection property as follows:

             Select Driver : tibcosoftwareinc.jdbc.sqlserver.SQLServerDriver

             JDBC URL : jdbc:tibcosoftwareinc:sqlserver://&lthostname>:&ltport number>databaseName=&ltdb-name>AuthenticationMethod=ntlm;LoadLibraryPath=&ltntlm dll dir>

                        (Note the string AuthenticationMethod=ntlm;LoadLibraryPath=&ltdll location> appended at the end of the URL).
              
             &ltntlm dll dir> refers to directory where ntlm dlls (like DDJDBCAuthxx.dll, DDJDBC64Authxx.dll etc) are located. By default they are located at &ltTIBCO-HOME>\tpcl\5.6\\dbc\lib directory.

             User Id: not needed. (Anything entered here will be ignored)

             Password: not needed. (Anything entered here will be ignored)

             Try test connection to make sure it is successful.

(4)  Undeploy/Deploy BusinessConnect with following changes.

        Go to : Application Management - BusinessConnect -  Configuration

        Edit Service Instance: Single Server - Process Configuration - NT Service section :
        Enable as NT service with Windows domain user as in step (1) and (2).

(5)  Start BC Engine as Windows Service.

For more details on windows NTLM Authentication with the TIBCO-branded driver refer to below documentation.
DataDirect Connect for JDBC Installation Guide - Chapter 6 The Microsoft SQL Server Driver
Section : Configuring NTLM Authentication

You can find above document in &lttibco-home>\tpcl\5.6\jdbc\help directory.