The data source does not support server-side data paging

You can use generic List<T> also. See the sample code snippet:

public List<Company> GetContactList(int startindex)
{

    string path = Server.MapPath("~/contacts.xml");
    XDocument xd = XDocument.Load(path);
    IEnumerable<Company> results = (from items in xd.Elements("Company").Elements("Contact")
                   select new Company
                   {
                       Id = items.Element("ID").Value,
                       Photo = (string)items.Element("photo").Value,
                       Name = (string)items.Element("Name").Value,
                       BloodGroup = (string)items.Element("Bg").Value,
                       Dob = (string)items.Element("dob").Value,
                       Anniversery = (string)items.Element("avd").Value,
                       Mobile = (string)items.Element("cnum").Value,
                       designation = (string)items.Element("desig").Value,
                       Team = (string)items.Element("team").Value
                   }).Skip(startindex*10).Take(10);
    return (List<Company>) results;
}

You can also use DataSet/DataTable instead of DataReader.

A simple ToList() on your result var should work.

Edit: As explained in comments below my answer, the reason for the error is that the data source should implement ICollection. IEnumerable does not, when you do ToList() it converts it into a list which implements ICollection.