Settlement Agreement Template (India) — Free Format
A settlement agreement resolves a dispute on agreed terms — usually a payment in exchange for a release of claims and withdrawal of proceedings. This template works for commercial disputes, recovery matters and employee exits, and can be filed in court as a compromise.
Stamp, registration and e-sign at a glance
The three things to settle before anyone signs this agreement in India.
Payable under the stamp law of the state where it is signed; rates vary by state. Unstamped, it cannot be used as evidence until duty and penalty are paid.
Check your state's rateRegistration is not required, unless the settlement transfers rights in immovable property.
This agreement can be signed electronically with Aadhaar eSign or a DSC under the Information Technology Act, 2000. Electronic signatures listed in the Act's Second Schedule carry a presumption of reliability.
What cannot be e-signedWhat is a Settlement Agreement?
A settlement agreement records the dispute, the settlement amount and schedule, mutual releases, confidentiality and what happens to pending cases. In court proceedings, a lawful compromise can be recorded under Order XXIII Rule 3 of the Code of Civil Procedure, 1908 and a decree passed in its terms.
When to use it
- Settling an unpaid invoice or contract dispute
- Closing a cheque bounce or recovery case
- Agreeing exit terms with an employee or business partner
Key clauses checklist
Make sure your draft covers each of these. Linked clauses open a sample wording with drafting tips.
- Background of the dispute
- Settlement amount and schedule Sample clause
- Release of claims
- Withdrawal of proceedings
- Confidentiality Sample clause
- Default and revival of claims
Indian law notes
Compromise in court
Where a suit is pending, the parties can file the settlement and ask the court to record it under Order XXIII Rule 3 CPC, which leads to a compromise decree that is executable.
Cheque bounce cases
Offences under Section 138 of the Negotiable Instruments Act are compoundable under Section 147, so a settlement can lead to the complaint being compounded. Courts have issued guidelines on costs when compounding at later stages.
Lok Adalat and mediation
Settlements reached in a Lok Adalat become an award with the effect of a decree. The Mediation Act, 2023 also provides for enforceable mediated settlement agreements once its provisions are in force.
SETTLEMENT AGREEMENT
This Settlement Agreement is made at [City] on [Date] between:
[Party A Name], [address] ("Party A"); and
[Party B Name], [address] ("Party B").
1. BACKGROUND
1.1 Disputes have arisen between the parties regarding [describe dispute, e.g. unpaid invoices under the agreement dated [ ]] (the "Dispute").
1.2 [Party A has filed [case type and number] before [Court] (the "Proceedings").]
1.3 The parties wish to settle the Dispute fully and finally, without admission of liability.
2. SETTLEMENT AMOUNT
Party B shall pay Party A Rs. [Amount] (the "Settlement Amount") as follows: [Rs. [ ] on signing; Rs. [ ] by [Date]], by bank transfer to [account details].
3. WITHDRAWAL OF PROCEEDINGS
Within [7] days of receiving the [full / first instalment of the] Settlement Amount, Party A shall [withdraw / file this settlement for recording as a compromise in] the Proceedings, with each party bearing its own costs.
4. RELEASE
On receipt of the full Settlement Amount, each party releases the other, and its officers and employees, from all claims arising out of or relating to the Dispute, whether known or unknown.
5. DEFAULT
If Party B fails to pay any instalment within [7] days of its due date, Party A may (a) recover the unpaid balance immediately with interest at [ ]% per year; and (b) revive or continue the Proceedings, and the release in clause 4 shall not apply.
6. CONFIDENTIALITY AND NON-DISPARAGEMENT
The parties shall keep the terms of this Agreement confidential, except as needed to record it in the Proceedings or as required by law, and shall not make disparaging statements about each other regarding the Dispute.
7. NO ADMISSION
This Agreement is a compromise and not an admission of liability by either party.
8. GOVERNING LAW
This Agreement is governed by the laws of India and the courts at [City] have jurisdiction.
Party A: ____________ Party B: ____________
Witnesses: 1. ____________ 2. ____________ Replace every [placeholder] and delete options that do not apply. Check Section 138 timelines
How to execute it
From blank template to a signed, stamped and stored contract.
Record the dispute, the amount and the payment schedule.
Agree what happens to pending cases and on default.
Stamp and sign the agreement.
File it in court for a compromise decree if proceedings are pending.
Track instalment dates and close the matter once paid.
Frequently asked questions
Is an out-of-court settlement legally binding in India?
Yes. A settlement agreement is a contract. If a case is pending, recording it as a compromise in court makes it executable as a decree.
Can a cheque bounce case be settled?
Yes. Section 138 offences are compoundable under Section 147 of the Negotiable Instruments Act.
What if the other side does not pay the settlement amount?
Include a default clause that lets you recover the balance and revive the original proceedings.
Related templates
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