what is the way to restrict selling to some STATES ?

Could you just remove the States you do not want?

no still we will get the orders from other states as people can add them in ADDRESS fields
 
so we need proper functioning like countries restriction is there..

If you make the state field (for address AND delivery address) a required field and maybe ammend the static massage for the state field to something like
 
We only deliver to the following states at present please choose one. + make it clear in terms and condition and mybe even add a new block to registration pages and checkout stating the same.
 
+ Are you aware that exactly like country you can also restrict supply to certain states also in shipping methods (well you can in version 3.5)
 
Hope this helps