The gunshot was fired accidentally when a pistol was being cleaned by a constable at the police station.
A division bench of justices Rajeev Sharma and Alok Singh also directed that the appellant be granted a job in the police department or the home guard organisation.
The court further directed the state government to consider raising the daily wages of home guards from Rs 400 at present to Rs 750.
He had prayed for an increase in the compensation amount and a job for himself as his mother had died in harness.
A single bench of the high court had earlier rejected his plea.