doesn't directly address your code issues, but here's a different approach that should do what you want from a bash prompt: 
for f in `cat /home/rjs/heena/edit` ; do
  perl -i.bak -0777 -pe 's/CONFIDENTIAL(.*?)own\s+risk/ /s' $f
done

[download]
Update: shell-independent method: perl -i.bak -0777 -pe 's/CONFIDENTIAL(.*?)own\s+risk/ /s' `cat /home/rjs/heena/edit`

If the 'edit' file contains a list of directories (i wasn't entirely sure from your post), then: 
for d in `cat /home/rjs/heena/edit` ; do
  perl -i.bak -0777 -pe 's/CONFIDENTIAL(.*?)own\s+risk/ /s' $d/*
done

[download]
See perlrun for info on the various switches (the -0777 causes a slurp).

In reply to Re: in place editing a list of files by davidrw
in thread in place editing a list of files by rjsaulakh

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