Let's have a look at that subroutine, shall we? I've asked emacs' cperl mode to indent it for us.

    sub login {
      $/ = "\015\012";
      print $client "username:";
      $login=<$client>;
      chomp $login;

      if ($login eq "") {
        print $client "Must enter a username!\n\r";
        &login;
      }

      $/ = "\012";
      open (FILE1, "users.txt") || print "Error occured while opening 
+file";
      while (<FILE1>) {
        ($first,$second ) = split /:/;
        print $first;
        if ($login eq $first) {
          print $client "Sorry this username has been taken, try again
+!\n\r";
          &login;
        }
        $/ = "\015\012";
      }

      close (FILE1);
      ...
[download]

What this highlights quite clearly, is that you're resetting $/ whilst you're still reading the file. Try moving it to outside the loop.

In addition, if it doesn't like the value it's found, then it's going to call &login again, while the file is still open. Which means that the file will be reopened, and $/ set inside a recursive call, then closed and reset when that recursive call ends. Not good thing.

In fact, the logon subroutine doesn't finish until 7 lines from the end of the script, containing the password subroutine on the way. Not good at all