The court, while handing down the sentence, also observed that the teacher had committed a "highly derogatory" offence which did not call for leniency.
Additional Sessions Judge Amit Kumar, also imposed a fine of Rs 5,000 on north Delhi resident Bernard Samuel.
"The offence, for which the convict has been convicted in the matter, is highly derogatory. It stands proved that the convict, who was working as a music teacher in the school, committed sexual assault upon a minor girl aged about 7 years and as such, no ground for leniency is made out," the court said.
"The concept of welfare and well being of children is basic for any civilised society and this has a direct bearing on the state of health and well being of the entire community, its growth and development," the court said while awarding the compensation.
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According to the complaint filed by the father of the child in April 2014, he was informed by the third standard student that the teacher had sexually assaulted her a few months before.
The complaint further alleged that despite informing the school about the incident, they failed to take action.
Samuel had claimed that he was falsely implicated in the case and argued that the alleged incident was of August, 2013, and that there was a delay of eight months in reporting the matter.
The court noted that there was no reason for the child to falsely implicate her music teacher in an offence like this.