look en the java website how to sign applets  and grant permissions.

That's impossible.
Unless you sign your applet.

look at your javaplugin.

also, look at file permissions.

put a try { } catch (Exception e) { e.printStackTrace(); } around init
and your readfile method.

look at the java console for possible errors.

From where does the applet  get the file from?

The problem is probably with file permissions, as the others have said. You
don't have access to read  from or write to any files  on the user's hard
disk, unless you sign your applet (I think about $25/year).