issue with host name lookup in PQconnectdb

The problem i am facing is that PQconnectdb is blocking even though i
specified connect_timeout=10. My observation is below.
1. To simulate this issue, i stopped the postgreSQL-x64-9.4 service and
executed my application.
2. host=localhost is used, database present in the same machine.
3. I have a service created by NSSM, created out of my application exe.
4. My application doesn't blocks, the PQconnectDB fails instantaneously but
when ran as a service PQconnectDB blocks. No difference in code and
environment between exe and service.
5. The blocking issue in service gets eliminated when i replace host with
hostaddr=127.0.0.1. I thought maybe DNS lookup was the issue.

With these observation i tried to understand the nature and root cause of
the issue, could someone throw a light on this?

-Dharani