The Mail on Sunday has agreed to pay £180,000 in damages to a former minicab licensing officer after the newspaper falsely accused him of acting as a “fixer” for paedophile taxi drivers in Rochdale.

Waj Iqbal, 44, told the Guardian his life had been ruined by the article, leaving him reliant on anti-depressants, out of work, and prevented from seeing his children. He said the legal victory followed a three-year battle and the newspaper had chosen to pick on him because of his race.

The Mail on Sunday story claimed Iqbal, who is British-Pakistani, cleared taxi drivers of the same background to work in Rochdale at a time when they were sexually abusing children.

“When the article came out I didn’t know what to do. It’s like my whole world crumbled around me,” he said. “The colour of my skin was the selling point. Put that together with grooming gangs and then – boom.”

Under the headline “Scandal of the mini-cab predators”, the newspaper focused on Iqbal, a junior taxi-licensing official at South Ribble borough council, as part of its coverage of the decision to renew the licence of a local driver called John O’Sullivan, who had been found guilty of assaulting a profoundly autistic child by tying him up on a school run.

The Mail on Sunday attempted to connect him to a much bigger scandal, claiming that in a previous job he was a “fixer” for taxi drivers in Rochdale “at a time when some local drivers were raping underage girls as members of paedophile rings”.

The piece appeared in May 2017, the same week that the BBC broadcast the drama series Three Girls about the scandal – leading many in the close-knit communities around Iqbal’s home to draw a connection between the two.

While Iqbal was working at Rochdale, it was as part of a large team covering all manner of licensing issues, an issue now accepted by the Mail on Sunday’s lawyers.

He said: “They put two and two together and got five. It’s easy to say that the Asian licensing officer is granting licensing to groomers.”

The impact on Iqbal, who also worked part-time as a bouncer, was immediate. The security company he worked for said he could no longer be employed as a member of door staff at local venues as there was too much interest in the story.

“I feared for my life. I put CCTV all up around my house because you get lunatics. I had to come off social media completely. My son was studying at Preston and people would say say: ‘Your dad’s dodgy, he’s part of this grooming thing.’”

Waj Iqbal: ‘It’s like my whole world crumbled around me.’ Photograph: Colin McPherson/The Guardian

He said being branded a paedophile-enabler pushed him towards suicidal thoughts. Potential employers would offer him agency work, Google his name and withdraw the offer when they saw the coverage. He said he had already being having issues in his marriage and this story was the “nail in the coffin”.

“The article portrayed me as the main guy when in reality there were 10 to 15 staff,” he said of his time at Rochdale. He said that in any case there was little the licensing department could have done about the grooming activities of the minicab drivers, since the police had been reluctant to investigate or prosecute the individuals. Because the drivers had not been found guilty of any offence, there was no reason to block their licences.

Instead, when the authorities finally took action against the paedophile drivers, it was Iqbal who found himself tasked with telling a driver who would later be convicted of child sex offences that he would be taken off the road.

“I went to deliver the suspension letter and his 11-year-old daughter opened the door. I was sickened to the stomach thinking about how he could do that stuff.”

‘Now I’m just trying to get my life back.’ Photograph: Colin McPherson/The Guardian

The case was picked up by the lawyer Mark Lewis, and on Thursday the Mail on Sunday settled at the high court in a case that is estimated to have cost the newspaper a further £1m in legal fees.

As part of the settlement the newspaper has agreed to retract the claims, with a court statement making clear that Iqbal did not work exclusively as a taxi licensing official while at Rochdale and emphasising that he was never issued with any formal warning over his work at South Ribble council.

Iqbal, who had struggled to find work and had been driving a 180-mile daily roundtrip from his home in Nelson to Wrexham in search of work, has celebrated the payout by taking a holiday to Bali.

But he said there was little upside from the incident. “Family-wise I couldn’t see my kids for two years because of the article. The money is there but the time I’ve lost with my children, you can’t put a price on it. And within the Asian community my reputation is basically gone.”

He said he was concerned about Islamophobia in parts of the British media. “I’m being portrayed as if I’m part of these bad people. Every society and race has bad people, it doesn’t mean everyone in that race are the same bad people. I was born in Yorkshire, grew up in Lancashire, my entire family are all hardcore British. Until this saga I loved my job, I like educating people, telling taxi drivers what the law says.”