Stack level too deep on upgrading rails 3.1.10 to 3.2.0

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I am getting the following errors after upgrading my rails application from 3.1.10 to 3.2.0.
rails console is opening fine. And, I am able to execute code in console. However, When I run rails server and open page in browser. It fails and shows the following errors.

SystemStackError (stack level too deep): actionpack (3.2.21) lib/action_dispatch/middleware/reloader.rb:70

Rendered /home/sarwan/.rvm/gems/ruby-1.9.3-p551@project-name/gems/actionpack-3.2.21/lib/action_dispatch/middleware/templates/rescues/_trace.erb (0.8ms)
Rendered /home/sarwan/.rvm/gems/ruby-1.9.3-p551@project-name/gems/actionpack-3.2.21/lib/action_dispatch/middleware/templates/rescues/_request_and_response.erb (0.7ms)
Rendered /home/sarwan/.rvm/gems/ruby-1.9.3-p551@project-name/gems/actionpack-3.2.21/lib/action_dispatch/middleware/templates/rescues/diagnostics.erb within rescues/layout (13.8ms)
Cache read: http://localhost:3000/favicon.ico?

Any help will be appreciated.

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