Hi Vittal,
If you want to delete the "High" option from your Priority field you would have to change any item already using that option to one of the other options. The easiest way to do this would probably be to use a Custom List or the new Work Views page under the Plan tab. From there you would be able to select your projects, the Defect item type and add the Priority column which should display the information you need. Then you can add a filter for the "High" option and bulk edit the defects so that a different option is displayed. After they have been changed you can delete the option and add the new one. You can find more information about the Work Views page here Work Views | CA Agile Central Help .
Alternatively, it might be easier to change the name of the "High" option to "Critical" rather than editing all of the defects currently using "High". You can do this by editing the field, but instead of adding a new option click on "High" and then in the line labeled Value below the option list type the new option's name, "Critical". After you have entered the new name you can save and all of the existing entries of "High" will change to the name "Critical".
I hope that this information helps. Please let us know if you have any questions.