Can possession of a land be claimed in the absence of valid agreement

I belong to a Hindu Rajput family. My grand after bought a property in 1985 from another Brahmin Family by paying the amount of asked by the seller. Since the area i belong to is a rural and the relationship that my grand father and the seller carried was very close. They settle the selling agreement on a 500 rupee stamp and no formal transfer of registration happened. Over the period the value of the property grew, while we all kept living on the same land. We have now constructed two houses, have electricity and telephone connection in the same house. The seller and my grand father died some where 8 years back. Now the grand son of the seller, has filed a law suit in the court, saying that the land was rented to us in 2007 and not sold. As a matter of fact, My sister, my younger brother and i were born in the same house. Our names are listed in the Family register of the village. The eldest of us was born in 1986. Please advise what all option does my family has.