Errors out saying didnot find highline?

[millisami]

I tried this handler on omnibus installed chef in ubuntu oneric.

chef_gem 'chef-handler-mail'
gem 'chef-handler-mail'

chef_handler "MailHandler" do
  source 'chef/handler/mail'
  arguments :to_address => "millisami@mydot.com"
  action :nothing
end.run_action(:enable)

But it errors out complaining about highline gem not found but its installed already.

The trace is at https://gist.github.com/3148965

And the following is the gems installed. highline is also already installed.

ubuntu@ip-10-202-66-91:~$ /opt/chef/embedded/bin/gem list

*** LOCAL GEMS ***

bundler (1.0.22)
bunny (0.7.9)
chef (10.12.0, 10.12.0.rc.1)
chef-handler-mail (0.1.2)
erubis (2.7.0)
highline (1.6.13, 1.6.12)
i18n (0.6.0)
ipaddress (0.8.0)
json (1.6.1)
mail (2.4.4)
mime-types (1.18)
minitest (1.6.0)
mixlib-authentication (1.1.4)
mixlib-cli (1.2.2)
mixlib-config (1.1.2)
mixlib-log (1.3.0)
mixlib-shellout (1.0.0)
moneta (0.6.0)
net-ssh (2.2.2)
net-ssh-gateway (1.1.0)
net-ssh-multi (1.1)
ohai (6.14.0)
polyglot (0.3.3)
pony (1.4)
rake (0.8.7)
rdoc (2.5.8)
rest-client (1.6.7)
right_aws (2.1.0)
right_http_connection (1.3.0)
systemu (2.5.1)
treetop (1.4.10)
uuidtools (2.1.2)
yajl-ruby (1.1.0)