This seems to be a client problem and not a server or API problem. The client interprets the mail as a string and not as an HTML.

    MimeBodyPart plainBody = new MimeBodyPart();
        plainBody.setText("test", "UTF_8");

        MimeBodyPart htmlBody= new MimeBodyPart();
        htmlBody.setText("<b>test<\b>", "UTF_8");
        htmlBody.setHeader("Content-type", "text/html; charset=" + "UTF_8"); //$NON-NLS-1$ //$NON-NLS-2$

        MimeMultipart multipart= new MimeMultipart("alternative"); //$NON-NLS-1$
        multipart.addBodyPart(plainBody);
        multipart.addBodyPart(htmlBody);
    
    //
        String emailSubject = "Work item " + workItemID + " filed against " + categoryName + " in project area " + projectAreaName + " needs your attention";
        
        
        for(ITeamAreaHandle teamAreaHandle : teamAreaHandles)
        {
            ITeamArea teamArea = (ITeamArea)itemService.fetchItem(teamAreaHandle, IRepositoryItemService.COMPLETE);
            IContributorHandle[] memberHandles = teamArea.getMembers();
            if(memberHandles.length > 0)
            {
                for(IContributorHandle memberHandle : memberHandles)
                {
                    IContributor teamMember= (IContributor)itemService.fetchItem(memberHandle, IRepositoryItemService.COMPLETE);
                    String mailAddress = teamMember.getEmailAddress();                    
                    //send mail to user
                    //mailService.sendMail(mailService.getDefaultSender(), mailAddress, emailSubject, emailBody, "");
                    
                    //Using Multi-part Service here
                    //mailService.sendMultipartMail(mailService.getDefaultSender(), mailAddress,"test", mp, null);
                    mailService.sendMultipartMail(mailService.getDefaultSender(), mailAddress, emailSubject, multipart,"");

                }
          }