Holding that manufacturing defect and faulty workmanship of the fighter jet had led to the crash, a bench of Justices S Ravindra Bhat and Deepa Sharma asked the government and state-run Hindustan Aeronautics Limited (HAL) to pay Rs 5 lakh and Rs 50 lakh respectively to 46-year-old Wing Commander Sanjeet Singh Kaila within four weeks.
The order came on the plea of Kaila, who is currently posted as a wing commander at Nasik.
Kalia, through his counsel Bharat S Kumar, had sought compensation on account of "violation of his fundamental right to life, especially the right to work in a safe environment" under Article 21 of the Constitution.
The serving officer in the Indian Air Force (IAF) had moved the high court in 2013, also seeking a direction to the Centre and the HAL to issue a formal apology for the manufacturing defect and the faulty workmanship of the MiG-21 aircraft that allegedly led to the crash.
He has also sought guidelines for the manufacturing company in order to avoid such incidents in future.
Allowing his plea for compensation, the high court noted that putting the officers of the armed forces above what is "expected to be normal risk" was against the fundamental right to life, especially the right to work in a safe environment guaranteed by the Constitution.
The bench said the HAL was liable to compensate him for "exposing him to more than reasonable risk".
The Russian-origin fighter aircraft has been often referred to as the "Flying Coffin" and "widowmaker" due to its poor safety record.
It was the first time, a crash survivor has taken on the government seeking redressal.
A regular flight exercise in 2005 had gone awry, leaving Kaila with debilitating neck and back pain that has rendered him unfit for flying and even day-to-day activities.
Flying a MiG-21, which crashed in Rajasthan on January 4, 2005, amounted to "violation of his fundamental right to life", he had told the court earlier.
In his plea, Kaila had said he was posted at Air Force Station Nal in Rajasthan as a Squadron Leader in 2005. On January 4 that year, he embarked on a regular flight exercise along with three other pilots.
"Immediately after take-off, the petitioner experienced a drift to the left side of the aircraft. Simultaneously, the petitioner was informed by the other pilot flying the second aircraft, of a fire at the rear end of his aircraft. Assessing the emergency, the petitioner promptly carried out all the essential directives and got the tyres of the aircraft down for a landing," the petition had said.
"The petitioner performed all the aforementioned actions despite the rear of the aircraft being engulfed in thick fire. Despite a near-complete engine/control failure and at grave risk to his own life, the petitioner continued to stay put in an almost uncontrollable aircraft so as to steer it away to safety from a nearby village... To save human life, the petitioner ejected only seconds before the crash of the aircraft."
Kaila said following the incident, he was injured and later forced to discontinue flying after a comprehensive medical examination showed he was suffering from cervicalgia and disc bulges of the vertebrae (cervical spine).
"The medical report also clearly mentions that the petitioner was rendered unfit for flying duties because of the incident. He was additionally instructed and advised by the doctors to even refrain from performing even day-to-day tasks," it had said.
The petition had further alleged that a reply to his RTI application revealed that the incident was caused due to a manufacturing defect and poor workmanship at HAL's facility.
Kaila had claimed that despite sending a representation to the government on December 25, 2012, seeking justice by compensating him for the loss suffered as a result of the air crash, no response was given by the government.