It's wonderful that you are providing a safe home for your niece when her mother would rather spitefully see her homeless to try to bring her to heel - as another poster put it rather well.
To recap - your niece responded normally to a strange man being forced into her life when she was a young teenager. Her response was standard, normal and could have absolutely been lessened or avoided if her mother had just waited.
But mother wanted it so mother did it.
She doesn't seem to even question why her daughter loathes this man. There could be very, very good reasons. He might be an absolute shit to her when OP is not around, he might have tried sexual advances, or it could just be that her mother ditched her daughter in his favour and he moved in far, far too fast and she reacted in a predictable way to feeling unloved and displaced in her own home by her own mother.
The daughter would have come round eventually if her mother wasn't trying to vindictively punish her into compliance, strip her daughter of a safe, reliable relative's care, and ram a baby she's not interested in down her gullet.
OPs sister's attempt to coerce and abuse her daughter into compliance, the fact that she'd be happy if she had nowhere else to go, instead of being grateful her sister is a safe haven and a point of contact tells us all we need to know.
The fixation on forcing a teenager to spend time with a baby draws a natural conclusion - mother was planning on free babysitting and is angry that this will not be happening.
Basically, the mother is a selfish fool who wants compliance, regardless of her daughter's feelings.
She cannot win a battle of power - because she's lost her power and she's headed the right way to lose her daughter forever.
Moving forward, her only hope is to stop attempting to coercively control her daughter and ask politely for updates from her sister. She should be very grateful her sister is looking after her child and offering a communication bride for the future.
The mother must not, of course, issue any further commands or attempt to shackle the niece to the baby or the partner.
OPs sister will just have to accept that there will be no relationship until OPs sister can repair some of the damage she has caused by forcing a strange man into her daughter's life and making her feel unloved, unwanted and displaced. But she sounds utterly lacking in any self awareness, so I guess this is the start of years of estrangement.
At least the niece has a safe haven with her aunt, it's vital she has somewhere safe to stay and go, she is still young and needs to know someone has got her back - even though her mother does not.