Nicked, distinguished companion is put inside (7)
I believe the answer is:
notched
'nicked' is the definition.
(I've seen this before)
'distinguished companion is put inside' is the wordplay.
'distinguished' becomes 'noted' (I've seen this before).
'companion' becomes 'ch' (Companion of Honour).
'is put inside' means one lot of letters goes inside another.
'noted' going around 'ch' is 'NOTCHED'.
(Other definitions for notched that I've seen before include "Indented, incised" , "Carved with a nick" , "Serrated" , "Made incisions in (something)" , "marked" .)