1. Since civil suit takes time and BMC is a public authority file a writ petition seeking removal of its encroachment from your land.
2. As the papers regarding your land is clean and clear the BMC should not defend its actions in court if it used your private land for public purposes without acquiring the land by the state govt and then requisitioned this for this purpose.
3. However of the actions of your neighbour is subsequent to the encroachment of BMC then you will have to file separate civil suit against your neighbour.