[eluser]wiredesignz[/eluser]
Ok so look further down the code in index.php to the block of code which checks the application directory.
Code:
// The path to the "application" folder
if (is_dir($application_folder))
{...
Could it be that the directory cannot be found?
Rename both the application directory and change the index.php setting to something other than 'cms'
EDIT:
Have you set $modules_locations in the config file?