Hi Ambarish:
You'd see that error when the user account (or apikey) you are using to authenticate your python script does not have permission to create a list in that Study1 subfolder. The syntax itself is fine and works when permissions are set to allow list creation.
If your script worked for project_name="Study" and doesn't work for "Study/Study1", check the permissions on that subfolder through the UI. I can reproduce your error message when the container exists, but the user account does not have list creation permission there. A second possibility is that if you are authenticating using a session key, it may have expired.
If neither of these resolves your issue, please send the end part of the labkey.log which will give more details about the error.
--Molly