Missing the Rails 2.3.4 gem while starting ahnctl

[sandipransing]

config.enable_rails :path => '../', :env => :production

gives error

Missing the Rails 2.3.4 gem. Please gem install -v=2.3.4 rails, update your RAILS_GEM_VERSION setting in config/environment.rb for the Rails version you do have installed, or comment out RAILS_GEM_VERSION to use the latest version installed.

but rails 2.3.4 is already installed

gem list | grep rails
rails (2.3.5, 2.3.4, 2.1.2)

What could be the issue ??