HR absolutely struggled with the issue. The HR folks tasked with dealing with discrimination issues largely had spent their time constructing company wide emails and classes that revolved around white folks discriminating against others / concepts of privilege, absolutely froze when faced with a discrimination issue outside that stereotype.
Long story short legal eventually was the brave one and decided that yes it was discrimination and the manager in question was asked to move on. The folks he refused to work with were compensated and their status in the company (pay scale, etc) was corrected.
As one of my Indian college's observed about the manager in question "If he was white this would have been dealt with sooner."
Credit to my Indian coworkers who really pushed this issue with HR and made legal act in the end. They wanted nothing to do with this kind of behavior.