Praise be to Allaah.
We put this question to Shaykh Muhammad ibn Saalih al-‘Uthaymeen, may Allaah preserve him, who answered as follows:
He may take as much as he lost, but it is not permissible for him to take more because this is riba. Even if we assume that it is a penalty, it should be given to the Bayt al-Maal (treasury) of the Muslims, he (the individual) has no right to it.
Question: when they try to justify it, they say: this is money which you had the right to take ten years ago. If you had taken it ten years ago, you could have benefited from it and invested it, so this additional sum is compensation for withholding it all this time.
Answer: This is not permissible according to sharee’ah, because firstly, if he had taken the money at that time and used it, he could have lost it. Secondly, it is not permissible to take an additional amount in return for delaying payment, as stated above.
Question: does the fact that the additional amount was not stipulated in advance change anything?
Answer: It does not change anything, and it is not permissible to take the additional amount even if it was not stipulated in advance. Moreover, it is known that the one who is paying this amount is being forced to do so.