Nadir, 71, who had been Britain's most famous fugitive from justice until he was jailed for 10 years this summer, was ordered to make the payment after a judge ruled that the disgraced tycoon was lying when he claimed to be penniless.
Justice Holroyde said it was an "affront to common sense" for Nadir to claim he had not earned any money during his 17 years in exile in northern Cyprus and was living on handouts from his mother.
"I simply cannot accept that such a proud and talented man, living in a community which admired him greatly, has for nearly two decades relied on subventions from his mother, his girlfriend [and a close friend]," Holroyde said in this judgement at the Old Bailey. "Why would he have impoverished and demeaned himself in that way?"
The judge said he was "maybe being more generous to him than he deserves" in ordering Nadir to pay back just £5m of the £29m stolen "out of pure greed".
Holroyde said he believed Nadir had enough money to "make it worth his while" to conceal his true financial position from the court. "He must have the means to meet £5m."
He pointed out that, during the theft trial, Nadir had "arrived at court every day in a chauffeur-driven Jaguar, and his wife in a £40,000 Range Rover".
The court heard that Nadir, who became known as the The Man from Del Monte after buying the fruit canning business, and his 28-year-old wife Nur were living in a Mayfair townhouse that cost £1m a year to rent. The judge rejected claims that a newspaper business and the lavish Loch Manor Cypriot mansion were owned by Nadir's mother, Safiye.
Holroyde said Nadir, who is serving his sentence at Belmarsh prison, south London, had chosen not to take the stand to defend himself because "he was not prepared to face cross examination".
Two of Nadir's key witnesses were caught out during the three-day hearing. The judge said the claim by Nadir's sister, Bilge Nevzat, that her brother had lived as a recluse while he was in exile in Cyprus was "impossible to reconcile" with a book she wrote describing her brother as a wonderfully dedicated businessman.
Nadir's claim not to have a bank account was also exposed as a lie when a friend, the Turkish airline tycoon Hamit Bagana, provided the court with financial records. Bagana had claimed he gave Nadir £4m to help pay his legal fees and support his lavish Mayfair lifestyle during the trial.
"The inescapable inference is that the bank account revealed to the court by Mr Bagana is but one of several," Holroyde said. He added that Nadir's wife had three bank accounts in Cyrpus in 2010, but none of them was in the local currency.
Prosecutors said the £29m thefts, worth £60m in today's money, were specimen representations of total thefts of more than £146m. The judge ordered Nadir to pay the £5m compensation to the administrators of Polly Peck International within two years, but he was not ordered to pay any of the costs of the seven-month theft trial, which is estimated to have cost the taxpayer about £23m.
Nadir had been a hero among City investors in the 1980s, when he rapidly transforming an East End rag trade firm into a £1.7bn multinational conglomerate with interests in food, including the Del Monte fruit group, electronics, textiles and leisure.
He had been due to stand trial in 1993, but fled to northern Cyprus in May that year on a private plane.
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