The state government has now initiated the process of withdrawing all the medals and honours given to Krishen, who is under arrest for alleged militant links.
"The process of stripping the officer of the honours and medals given to him has been initiated," police sources said.
Krishen, who has also received President's Police Medal for Gallantry, was arrested earlier in June after investigations into a grenade attack on a police station in Doda region revealed that he was running a militant module.
Although Krishen had been awarded the state police medal many times before his arrest, the inclusion of his name in the list of recipients has drawn criticism from some quarters.
Kirshen was not present at the function held on Wednesday as he is in police custody following his arrest on June 4.
It was not clear whether his name was read at the function due to confusion over his name. Initial reports after his arrest identified him as 'Shiv Kumar Sharma' but it was later corrected to his real name, Shiv Krishen.
The recipients of 'Sher-e-Kashmir' medal also included a selection grade constable, Jagdish Singh, who got a medal pinned by the Chief Minister, in spite of being under suspension from service.