Session doesn't work after update from 2.2.1 to 3

But I am getting error Unable to locate the specified class: Session.php 
But incase I move Session.php from Session folder to libraries I dont get any error but login page doesn't work.

You're not supposed to do that.
Also, if by "move" you mean "overwrite another Session.php file that was already there", then you haven't followed the upgrade instructions.

I have commented session.start() function in the Session.php class as the application gave my error Severity: Warning


Message: ini_set(): A session is active. You cannot change the session module's ini settings at this time

Don't comment out just to hide errors. You're breaking stuff that way.
The error message is pretty clear - you already have a session started elsewhere.

Have you read and followed:
https://www.codeigniter.com/userguide3/i...e_300.html

Have you tried:
http://lmgtfy.com/?q=%22Unable+to+locate...ion.php%22

Yes, Sir this is how the config.php looks now 
$config['sess_cookie_name'] = 'ci_sessions';
$config['sess_expiration'] = 86400; //24 hours
//$config['sess_expire_on_close'] = TRUE;
//$config['sess_encrypt_cookie'] = FALSE;
$config['sess_use_database'] = FALSE;
$config['sess_table_name'] = FALSE;
$config['sess_match_ip'] = FALSE;
//$config['sess_match_useragent'] = TRUE;
$config['sess_time_to_update'] = 86400; //24 hours
$config['sess_driver'] = 'database';
$config['sess_save_path'] = 'ci_sessions';

Still I am getting the same error.

Did you read the note marked as Important in Step 1? See my reply to the first quote above.

Also, you're still keeping stuff from CI2 that you're not supposed to. Start clean - use the CI3 config.php and only modify the options it has.

1) Not using a database, your config says that session data will be stored in the "ci_sessions" folder. I trust that folder exists and is writeable?

He's using the database driver.