Yes, he was. He gives the narrator no chance at all. It is as if all those who claimed to have lost their purse were liars. Even when the narrator asks him to keep his coat, he shows no leniency. He has a lot of sadistic pleasure at the cost of the narrator while forcing him to strip. He comes out as a cruel man who has no pity at all for people with problems.
However, there is the possibility that he has turned out to be so cruel after bitter experiences. If we consider the fact that the people of that place were ready to do anything for money, we should understand that the restaurant owner might have had people duping him with a cock-and-bull story of losing the purse. Maybe over the years, he has lost his gentleness and hence goes to the extreme extent of ill-treating such people so that others wouldn’t dare come up with lies.
All said and done, the final word on the restaurant owner is that he comes out as merciless. He could have made the narrator do some work in his restaurant to make up for the eleven annas. But, he gives absolutely no chance to the narrator and humiliates him cruelly.