Sounds like your across the pond... :) "Can they forbid them from seeing the grandchild?" - In reality that is like me telling you, you can NEVER go see a movie at a theater ever again... kind of stupid to tell a grown adult what they can and cannot do... you get the idea though of how stupid the cult is...
However, from their own doctrine they CANNOT forbid the grandparents from seeing their grandchild. They are providing a service for their daughter who is the one that may be DF'd, not the child. The relationship between the daughter and her parents would be one of a mutual work agreement, would not hurt to perhaps draw up a contract, for the sake of the parents if they are ever questioned by the elders, at least they could present something to the affect that this BUSINESS NOT SOCIAL. The child has not done anything wrong, nor is baptized from what I understand, nor has been "punished" by "god", and thus the actions of her mother have no influence on the standing of the child to their grandparents.
Pretty sick how the WTS operates. None of this should be an issue, but I can see the elders going above and beyond in their self rightous BS. Anyways, to appease the elders, and to put the grandparents at rest, and a way out, I would draw up a simple contract for "baby sitting", perhaps with a nominal fee (at least on paper), or "free", have it witnessed, notorized, etc. and if the grandparents are questioned in the future they can pesent the document, tell the elders it is 100% business related, which the WTS has indicated is OK to do.