According to an affidavit from the businessman, she demanded a refund after the diamond ring, purchased in Dubai, was delivered to her after it had been polished by a third party.
When Jamal Ahmed failed to repay the money to an account in Dubai, even though he says it was remitted through a Zimbabwe bank, the first lady forcibly took over his three houses last October, his testimony said.
The case also involved Mrs Mugabe's son from her first marriage to Russell Goreraza.
The affidavit said Mr Ahmed then suffered a "reign of terror and harassment" and was "verbally threatened, harassed, insulted" and told that he could not do anything about it "as the parties involved [Mrs Mugabe and her son] were in fact 'Zimbabwe'".
Justice Clement Phiri said Mrs Mugabe should also ensure that all workers who lost their jobs at the three properties owned by the diamond seller be reinstated.
The ring was meant to be President Robert Mugabe’s present to his wife for their 20th wedding anniversary, News24 says.