The body of the militant, identified as Farhan Ahmad Wani, was handed over to his parents for burial in Khudwani village on the border of Kulgam and Shopian where villagers were already agitating over the death of a person killed in a road accident involving a para-military vehicle.
Wani's death agitated the crowd further and it started pelting stones at a nearby Army camp, officials said.
They said the Army started firing in the air initially but had to aim at the crowd when jawans claimed to have been fired upon from the other side, the officials said.
The deceased has been identified as 22-year-old Khalid Dar.
Giving details of the encounter, the officials said that there was an intelligence input that militants from Hizbul Mujahideen and Lashker-e-Taiba had gathered in Pehlipora village in Larnoo, Kokernag.
One militant was killed while five others were believed to have managed to escape, the officials said.
Earlier, the police and the Army had claimed to have killed two militants in the encounter.
The police spokesperson said that the police along with the Army and the CRPF cordoned the area and launched a search operation in Pehlipora village after getting information about the presence of militants there.
"During the searches, terrorist hiding in the area fired upon the joint search team. The fire was retaliated," he said.
"One terrorist was killed in the encounter who was identified as Farhan Ahmad Wani, a resident of Redwani- Khudwani in Kulgam district," he said.
The spokesperson said one INSAS rifle, two magazines and 42 rounds were recovered from the encounter site.
Wani was a "hardcore stone pelter" and an FIR was registered against him under different sections of the Jammu and Kashmir State Ranbir Penal Code.
He was also involved in many anti-national and unlawful activities, the spokesperson said.
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