City Football Group invited Dolly to their academy in an effort to try and sign him for one of their teams, but certainly not for Manchester City.
Mitchell admits that they turned down the 'offer' simply because there was already strong interest for Dolly's services from several European clubs.
He reveals that City Football Group wanted to send Dolly to New York City in the Major League Soccer (MLS).
"Sundowns want to portray me as a bad person here. It is true that I contacted Manchester City's director and he said he didn't know who Keagan Dolly was," Mitchell told the Isolezwe newspaper.
"They (Sundowns) speak as if Dolly was wanted by Manchester City from England, but if you read the letter carefully, you will see that City [Football Group] wanted to take him to some of their teams. Manchester City has too many clubs under their name," he said.
"They have teams in USA, India and Australia. They wanted to take Dolly to New York City in USA. We refused because there are teams that want him in Europe," he continued.
He added: "Manchester City and City Football Group have different directors. We won't allow the boy to go play in USA when he has the chance to play in the Uefa Champions League and Europa League."
"The MLS is more or less similar to the South African league. The majority of the players there play for money, but Keagan still wants to make a name for himself," Mitchell concluded.
French Ligue 1 outfit Montpellier have reportedly made a bid well above Dolly's current buyout clause, and it remains to be seen whether or not Sundowns will allow the player to move before the end of the month.