Is settlement written on plain paper and signed by 2 witnesses valid?

Yes a settlement agreement signed by you and your wife shall have a legal nature if the same is drafted in a proper manner.

You should enter into a Settlement Agreement with your wife specifying not only the fact that she agrees for a mutual divorce but also with respect to the other terms and conditions of the divorce. This should specify the distribution of assets such as stridhan etc., maintenance / alimony payable by you post divorce, that this amount would be a full and final payment and no party shall have any other rights as against the other party. And get this Agreement signed by 2 witnesses.

Now once this Agreement is executed, and the payment has been made by you, then if your wife tries to back out (which is a common tactic used by wives to harass the husbands), you can present the settlement Agreement before the Competent Court seeking divorce by mutual consent. The Indian Courts have not allowed the women to harass their husbands once such settlement agreements have been executed. You kindly try to make some part payment in pursuance to this agreement that will bind her in law.

However, if you are looking to find a provision that bars the women from changing her mind, then such a provision does not exist in the Indian Law as the Hindu law allows the parties to change their decision of divorce by mutual consent between the time period of First Motion order to Second Motion Order as well.

Recently, a women after entering into a settlement agreement and filing a petition for first motion, decided to withdraw her consent and demanded more money, the Rajasthan High Court did not allow the women to harass her husband in this manner and the divorce decree was passed as per the original settlement agreement only.