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Noise on quadrature encoderchannels

Other Parts Discussed in Thread: SN75175

Hi.

I am currently working on a robotic system where I have two motors, a motor driver and quadrature encoders. I am using encoder in single ended signal configuration, directly interfaced to microcontroller. But I'm facing some noise problems in this system. 

I'm getting peaks occurring at 30KHz frequency on encoder channel while it is not rotating. I observed similar spikes on ground too. I suspect that these are generated by motor driver as it is operating on same frequency and there is hardly any noise observed when it is powered down. The motor driver is isolated optically from digital system, I'm using two separate batteries to power them. 

These peaks have amplitude of 1v while no load, must be crossing 5v volts when the motor starts as I get erroneous readings when motor starts.

Can you suggest remedy to overcome this problem? Thanks in advance.