You can see the two approaches that you can take from here. One is litigative and the other ( Sandeeps) takes into consideration human factors.
From the learned lawyers advice, it appears you may "win" but the win may be the begining of your losses and new grief if you dont handle the matter with sensitivity it deserves.
My take on this is to retain a lawyer like Sandeep but develop a cross functional team involving a child psychologist, family and marriage therapist, social worker and approach the issue with collective decision making.
Let a neutral party or social worker or a pschologist champion you to the in-laws and make them understand the role of a father in childs life. Dont start custody tug of war now. The bonds between your daughter and the in-laws may have grown strong enough for the child to treat you as a stranger. Start with visiting the child for a few hours on the weekeds and play with the child,assist the in-laws with some chores and slowly build bond with the child and in-laws but dont take the child out of the current environment. After a period of time, get a social worker / child psychologisit assess the situation and provide recommendation. Try to improve your parenting skills and get to a point where you are respected and loved by the child and in-laws.
Some questions you may wish to consider/answer for the sake of developing a strategy and soliciting free public opinion/wisdom of the crowd.
1. How old is the child ?
2. Is the child male/female ?
3. What is the proffession of the in-laws. Are they working/retired grandparents ?
4. What school/education/activities is the child involved in currently ?
5. What is your marital status - married / single/dating. Are you straight or other ?
( an unstable, socially unacceptable personal life of the father is not in the best interest of the child)
6. When did you last see your child ?
7. How many days are you in contact with the child on an averega in a month. Does the child recognise you as the father ?What does the child call you?
8. Are you employed ?Do you have a place of your own ? Do you have any resource to support the upbringing of the child.
9. What have you done for the child since the birth of the child ? e.g school admission, fees, medical ...any support you have provided.
You have my sympathies.All the best