Kapoor with his Tate Modern installation Marsyas

The judge ruled that the 1984 sculpture, Hole and Vessel II, was put in a skip during building works in 2004 and later destroyed at a waste plant.

Art collector Ofir Scheps, who placed the item with Fine Art Logistics Ltd of London, will receive the award.

Kapoor has expressed his "deep regret" over the loss of his artwork.

"It's an important work in terms of what I was up to then. I only made seven or eight works that year and it's a shame to lose one of them," said the Indian-born artist, who won the Turner Prize in 1991.

Not reasonable

Swiss-based Mr Scheps called an expert witness who claimed the sculpture would fetch �580,000.

But an expert for the defendants valued the artwork at �250,000.

Mr Justice Teare ruled on a figure of �351,375, comprised of the value of the piece when it was destroyed, and a sum to reflect the subsequent rise in value of Kapoor's work.

Mr Schelps sued the company for damages or the return of the piece, which he bought in 2004 for �20,000 and put in storage before Kapoor was due to carry out restoration work.

Fine Art Logistics admitted that it was impossible to return it because it had been placed in a skip for disposal, and offered to pay �587.13.

But the judge ruled that the limit of liability was not reasonable in this case and there was no evidence that it had offered to arrange insurance.