Shimla is the nearest from Chandigarh and will be easy to reach.
1) By road 5 hours
2) you can experience toy train (cheap and fun)
3) a good feel of hill station
4) plenty of option for hotel or stay
Central India ( Madhya Pradesh ) and East India ( Odisha ) because your grandparents may really enjoy the architectural marvels of the place. Also you may consider a trip to Mahabalipuram, Hampi or Ajanta and Ellora caves.
If you want to go Himachal Pradesh then dharamshala is the good place to visit for your granny and her knee problem. Because, there climbs, slopes and plains area as well. So, I personally think you should go there. For more details about Himachal tour and travel visit https://www.arcadiavacations.in/Himachal.html.