The docker-compose file was excactly same. But after hours of debugging find that the docker contexct was wrong type.
Command "docker context ls" lists all contexts and types, descriptions etc. The context was typeof "moby" and it should be typeof "aci".
I don't know how to change that or what that means. But I recreated it and now it is typeof "aci" and it resolves the "missing azure_file" problem.
Another thing to note when listing all contexts is the "DESCRIPTION" column. It marks "resourcegroup@location".