Hey there,
Depending on what "mail" you're using (revisions, etc), you may be dealing with an issue that is caused by passing the -s "SUBJECT" argument to mail.
If you have it on your system, you can change that line to read "mailx" instead of "mail" and it should work perfectly. Otherwise, you can pipe output to mail and include the subject line there, like this:
(echo "Subject: No File found for $file1";echo "$file1 does not exists " )|mail you@you.com
Hope that helps some,
Thanks,
Mike