An Indian-origin lawyer, who was once the lawyer of South Africa's first democratic president, Nelson Mandela, has apologised to the freedom icon for making defamatory claims against him.

Ismail Ayob of Johannesburg, who represented Mandela when he was in prison for more than 27 years and after his release in 1990, made the apology in an out of court settlement with Mandela's new lawyers on Tuesday.

Ayob, who was sacked by Mandela in 2005 and removed as a member of the Nelson Mandela Trust, has also agreed to pay back about $1,00,000 with regard to making 'unauthorised payment' from the Trust.

Lawyers for Mandela had demanded Ayob to pay back more than $3,15,000 'missing' from the Trust.

"In a signed agreement, Ayob has apologised to Mandela for hurting him and I am certain that Mandela being a forgiving person would accept the apology," said George Bizos, Mandela's lawyer.

Ayob had claimed in his affidavit that Mandela refused to pay taxes and that he approved several dodgy payments made by the Trust.

In papers filed in the Johannesburg High Court before the agreement, Mandela's lawyers claimed that Ayob had 'misused' about $2,85,000 from an amount of $25 million that Mandela had raised for the Trust from top businessmen and companies.