The Group added to the Policy Scope was of Scope "Universal" and Type "Security"
Fine-grained Password Polices can only work with groups of Scope "Global" and Type "Security"
Fine-grained password policies apply only global security groups and user objects (or inetOrgPerson objects if they are used instead of user objects).
This is the native restriction with Windows server on Fine-grained password polices.
Refer to Microsoft links where these are explicitly and implicitly mentioned:
To make Fine Grain password policies work for groups ensure they are of scope "Global' and type "Security"