فَلَمْ يَرَ الشَّيْخُ أَنْ يُسَامِحَنِي بِأَرْشِهَا إِذْ رَأَى تَأَوُّدَهَا
The elder would not waive compensation when he saw the needle bent and damaged.
Arsh refers to compensation for damage. Taʾawwuduhā describes the needle’s deformation. The young man has denied deliberate harm, but the elder still regards the property loss as worthy of compensation.