Hey @eniwoke ,
Thanks for replying and trying this out. 
I understand that giving %run "../Folder2/NB2" solves the issue, but the question is why is it so that I need to traverse one step back ?
As %run essentially executes the calling notebook codes inline from where it is being called, which in this case is the directory where main notebook is present. Similar to what you have pointed out that the directory for dbutils.notebook.run("./Folder2/NB2", 0) is same as that of main notebook, don't you think same should hold true for all the NB1 notebook codes, which can even comprise of another %run(as in my case) command ? 
PFB the screenshots(I updated the path to ensure a successful run) where you will see both the %run commands have same current working directory. So it should have recognized the path %run "./Folder2/NB2" as its executing directory is at the same level where Folder2 is present.