It depends on what kind of culture your mother-in-law comes from. If she comes from a place where whatever the elders in the family decided was good for the younger members (sons, daugters, their spouses) then her behaviour is probably according to those norms. This sort of issue is very common in the families of first-generation immigrants from Southern or East Asian countries.
For example, if such a situation happened to me when I was in my home country, then the societal reply (if I had posted something like the OP) would be "She's had more children than you, she's older than you and probably knows what's better for the kids. She's an elder person, and your mother-in-law and you have to respect her wishes". And if I then said I was not going to let my kids see her, people from my society would call e a bad daughter-in-law who kept the kids away from their grandparents.
The above is NOT what I think, but what would have happened if such a situation occured in my home country.
The reponse that I see in this thread to the OP is wholly western in thought and ideology.
So it is therefore my thought that you should think about where your mother-in-law comes from, and what made her think of doing this - it may not have been a power thing wih you, it might have been just her way of declaring herself the Martriarch of the family.