I have to validate the password against the one stored in a flat file. (No database involved)

DBI and DBD::SQLite are pretty easy to install, and SQLite is a self-contained database that uses a flat file for its data storage. If you feel yourself growing beyond the point where flat files start to become cumbersome, migrate to a database. If you haven't got the ability to install a real database, install SQLite. It's a pretty simple solution, self-contained in a Perl module.

Next point: Don't pass the encrypted password from session to session. Pass a hashed session ID. Validate password once, then maintain an MD5 hashed session ID.

Look at CGI::Session's documentation. It helps to wrap up these loose ends; it facilitates the use of a database (including SQLite), and via CGI::Session::ID::MD5 provides a means of handling hashed session identifiers.