"The film makers have agreed to pay 2.5m rupees as compensation, " Muthulakshmi's lawyer Sanjay Hegde told the BBC, describing it as a "binding agreement".
Justice Hegde had already shown how effective a state level ombudsman can be, and had already exposed massive corruption in the mining industry in Karnataka state.
"The court also directed the film-makers to take out adverts in three major newspapers stating that the film is based on police records only, " Mr Hegde said.