Kids, like mine, of Indian parents are readily given PIO(Person Of Indian Origin) cards if they happen to be foreign nationals by birth. I see no reason why these kids could not have been given a transit visa.
This is a clear abuse of children who were U.S. nationals. This is a federal crime in US punishable by non-bailable jail time. Vijay and Vaishali should lodge a complain in the US for this and I can guarantee you that the US prosecutors will follow this up with the Indian authorities. US prosecutors are known to get people punished in foreign countries for abusing U.S. children and Vijay and Vaishali should follow that route to get justice if they can prove that the kids were traumatized by this experience.
We should understand that this issue is no longer immigration. It is the intentional abuse of children. Providing a transit visa or not is the decision of the Immigration official, however discriminatory in this case, but mistreatment of kids is where they crossed the line. They could have always been taken into custody and treated well until they recovered from their inbound journey before putting them on the return flight.