You need to seek the custody of the child from the Court by filing a separate application before the court of law where your sister is residing in present days. Unless the court grants her the custody of the child she can't take away the child from his/her actual location and unless there is a proof that she has been given the custody of the child from on official note the school is right in their ambit to deny the TC to your nephew.
(i) if they give TC to your nephew on the request of your sister then her in-laws and husband can bring a separate suit in against them dragging them as well before the court of law, which in obvious situation they would like to happen.
(ii) granting TC is not a difficulty but granting TC in a situation wherein parties are before family court in relation to their matrimonial discord and none knows who will get the custody of child is a difficulty.
So take my advise file a suit before the court of law and seek custody of the child. Ask your nephew to come along with her mother to state that he wants to live to with her mother and based on this submission ask the court to grant the custody to your sister till the finality of the suit (custody suit - your sister's husband will also come to contest this case and after hearing his part final grant will be given from the side of the court in relation to custody).