A Docker container in a Docker container uses the parent HOST’s Docker daemon and hence, any volumes that are mounted in the “docker-in-docker” case is still referenced from the HOST, and not from the Container.
Therefore, the actual path mounted from the Jenkins container “does not exist” in the HOST. Due to this, a new directory is created in the “docker-in-docker” container that is empty. Same thing applies when a directory is mounted to a new Docker container inside a Container.
Very basic and obvious thing which I missed, but realized as soon I typed the question.