I am trying to bind the SocBlue A860 with my Xperia Z1, but my phone asks for passkey which is not generated by SocBlue A860 and the binding never happens.
Unbind Socblue from your iPhone. It is necessary as Socblue won't connect to a new device without being unbound from the previous one. After unbind you will be able to bind it with your Z1.
Reset your network settings in the Z1 and try again