While it is obvious that the COLOUR statement should be taken advantage when used on EGA or better display, on MDA displays, instead of being ignored or having some fallback mechanism, it causes screen corruption.
Issue was reproduced on an 86Box config. I just simply added the supposedly safe COLOUR=7,0,0 to a config.sys that had menu options, but all hell broke loose. Commenting it, solved the issue.
I have not tested this issue to happen on CGA displays, but this could also potentially be the case.