Yeah, Kali Yuga's eff states: "other cards and their effects cannot be activated [b]on the field[/b], and other cards' effects [b]on the field[/b] are negated."

Meanwhile, Madolches go, "If this card in your possession is destroyed by your opponent's card (by battle or card effect) and [b]sent to your Graveyard[/b]: Shuffle this card into the Deck."

By this reasoning, Madolches have to be in the Graveyard to activate this eff. Kali Yuga's eff only works on things on the field, so the Madolches' effect resolves normally.