jnlp based applet passing vm args -XX:MaxTenuringThreshold fails with 'Failed to validate certificate' message

Testsuite name: JDF
Test name(s): runtimeArgsTest::testRuntimeJNLPArgsMaxTenuringThreshold
Product(s) tested: 1.7.0_91 b09
OS/architecture: Windows x64 - 32 IE 11
Error log file (if present): http://aurora.ru.oracle.com/functional/faces/RunDetails.xhtml?names=1091248.STT-DEPLOYMENT-1
Reproducible: Always
Reproducible on machine:
spb23198.ru.oracle.com
Is it a Regression: Yes
 Regression introduced in release/build: 1.7.0 b05
Test result on the last GAed release for this train: Pass (7u85 b15)

Is it a platform specific issue: No

Exception/Error from Log:
sun.security.validator.ValidatorException: PKIX path validation failed: java.security.cert.CertPathValidatorException: Algorithm constraints check failed: MD5withRSA
at sun.security.validator.PKIXValidator.doValidate(Unknown Source)
at sun.security.validator.PKIXValidator.engineValidate(Unknown Source)
at sun.security.validator.Validator.validate(Unknown Source)
at sun.security.validator.Validator.validate(Unknown Source)
at sun.security.validator.Validator.validate(Unknown Source)
at com.sun.deploy.security.TrustDecider.getValidationState(Unknown Source)
at com.sun.deploy.security.TrustDecider.validateChain(Unknown Source)
at com.sun.deploy.security.TrustDecider.isAllPermissionGrantedInt(Unknown Source)
at com.sun.deploy.security.TrustDecider.isAllPermissionGranted(Unknown Source)
at com.sun.javaws.security.AppPolicy.grantUnrestrictedAccess(Unknown Source)
at com.sun.javaws.security.JNLPSignedResourcesHelper.checkSignedResourcesHelper(Unknown Source)
at com.sun.javaws.security.JNLPSignedResourcesHelper.checkSignedResources(Unknown Source)
at sun.plugin2.applet.JNLP2Manager.prepareLaunchFile(Unknown Source)
at sun.plugin2.applet.JNLP2Manager.loadJarFiles(Unknown Source)
at sun.plugin2.applet.Plugin2Manager$AppletExecutionRunnable.run(Unknown Source)
at java.lang.Thread.run(Unknown Source)
Caused by: java.security.cert.CertPathValidatorException: Algorithm constraints check failed: MD5withRSA
at sun.security.provider.certpath.PKIXMasterCertPathValidator.validate(Unknown Source)
at sun.security.provider.certpath.PKIXCertPathValidator.doValidate(Unknown Source)
at sun.security.provider.certpath.PKIXCertPathValidator.engineValidate(Unknown Source)
at java.security.cert.CertPathValidator.validate(Unknown Source)
... 16 more

Steps to reproduce:

1. Download and unzip attached zip. Unzip the file and deploy the contained runtimeArgs folder to tomcat/webapps folder. Restart tomcat (<tomcat_install>/bin/startup.sh).
2. Clear webstart cache with javaws -uninstall
3. Add http://127.0.0.1:8080 to exception site list
4. Launch http://127.0.0.1:8080/runtimeArgs/html/testRuntimeJNLPArgsMaxTenuringThreshold.html in IE
5. Accept Security Warning

Expected : Application gets launched.

Observed result:
The Application blocked dialog gets shown (Pls refer attached screenshot)

RULE runtimeArgsTest::testRuntimeJNLPArgsMaxTenuringThreshold Exception junit.framework.ComparisonFailure: testRuntimeJNLPArgsMaxTenuringThreshold expected:<TEST [PASS]ED> but was:<TEST [FAIL]ED>
at runtimeArgsTest.testRuntimeJNLPArgsMaxTenuringThreshold(runtimeArgsTest.java:...)